<PAGE>
As filed with Securities and Exchange Commission on April 30, 1999
Registration Nos. 33-88524; 811-8938
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
to the
FORM S-6
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
(Exact Name of Trust)
SECURITY EQUITY LIFE INSURANCE COMPANY
(Name of Depositor)
84 Business Park Drive - Suite 303
Armonk, New York 10504
(Address of Depositor's Principal Executive Offices)
CHRISTOPHER A. MARTIN, ESQ.
Counsel, General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b), of Rule 485.
/X/ On May 1, 1999 pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
/ / On May 1, 1999 pursuant to paragraph (a)(1) of Rule 485.
/ / This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933. The Notice required by Rule 24f-2 for 1998 will
be filed on or before March 31, 1999.
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT 13
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
<C> <C>
1 Cover Page.
2 Cover Page.
3 Inapplicable.
4 Sale of the Contract.
5 Information about SELIC.
6 The Separate Account.
7 Not Required.
8 Not Required.
9 Inapplicable.
10(a) Additional Provisions of the Contract.
10(b) The Contract.
10(c),(d),(e) Death Benefits under the Contract; Contract Values;
Summary of the Contract; Additional Provisions of the Contract;
Surrender and Partial Withdrawals; Contract Loan Privilege;
Transfers; Premiums; Appendix B.
10(f),(g),(h) Voting Rights; Additional Provisions of the Contract.
10(i) Additional Provisions of the Contract; Death Benefits
under the Contract; The Separate Account; Appendix B.
11 The Separate Account.
12 The Separate Account; Appendix A; Sale of the Contract.
13 Charges and Deductions; Sale of the Contract; Appendix A.
14 Premiums; Charges and Deductions; Sale of the Contract.
15 Premiums.
16 The Separate Account; Appendix A.
17 Captions referenced under Items 10(c), (d), (e) and (i) above.
18 The Separate Account; Contract Values.
19 Records and Reports; Sale of the Contracts.
20 Captions referenced under Items 6 and 10(g) above.
21 Contract Loan Privilege.
22 Inapplicable.
23 Sale of the Contract.
24 Additional Provisions of the Contract.
25 Information about SELIC.
26 Sale of the Contract.
27 Information about SELIC.
28 Management of the Company.
29 Information about SELIC.
30 Inapplicable.
31 Inapplicable.
<PAGE>
<PAGE>
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
<C> <C>
32 Inapplicable.
33 Inapplicable.
34 Sale of the Contract.
35 Information about SELIC.
36 Inapplicable.
37 Inapplicable.
38 Sale of the Contract.
39 Sale of the Contract.
40 Sale of the Contract.
41(a) Sale of the Contract.
42 Inapplicable.
43 Inapplicable.
44(a) The Separate Account; Appendix A; Premiums; Charges and
Deductions.
44(b) Charges and Deductions.
44(c) Premiums; Charges and Deductions.
45 Inapplicable.
46 Appendix A; Captions referenced under Items 10(c), (d) and (e)
above.
47 Inapplicable.
48 Inapplicable.
49 Inapplicable.
50 Inapplicable.
51 Cover Page; Death Benefits under the Contract; Termination;
Charges and Deductions; The Contract; Appendix B; Summary;
Additional Provisions of the Contract; Premiums; Sale of the
Contract.
52 Additional Provisions of the Contract.
53 Federal Income Tax Considerations.
54 Inapplicable.
55 Inapplicable.
59 Financial Statements.
</TABLE>
This Post-Effective Amendment No. 5 to the Registration Statement on
Form S-6 includes two prospectuses describing the Contracts. The first
prospectus ("Prospectus Version A") describes the Contracts as they will
be sold in the general market. The second prospectus ("Prospectus
Version B") describes the Contracts as they will be sold primarily
through a particular bank-affiliated distribution network.
<PAGE>
<PAGE>
PROSPECTUS VERSION A
<PAGE>
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE, SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
This Prospectus describes the Individual Flexible Premium Variable Life
Insurance Contract (the "Contract") offered by Security Equity Life
Insurance Company ("SELIC" or the "Company"). The Contract is designed
to provide lifetime insurance protection to age 100 and at the same time
provide maximum flexibility to vary premium payments and change the
level of death benefits payable under the Contract. This flexibility
allows a Contract Holder to provide for changing insurance needs under a
single insurance Contract. A Contract Holder also has the opportunity to
allocate Net Premiums among several investment portfolios with different
investment objectives.
The Contract provides for: (1) a Net Cash Value that can be obtained by
surrendering the Contract; (2) Contract loans; and (3) a Death Benefit
payable at the Insured's death. Contract Holders may also attach a
rider that amends the Contract to instead provide insurance coverage on
the lives of two Insureds, with proceeds payable upon the death of the
last surviving Insured. As long as a Contract remains in force, the
Death Benefit will not be less than the current Face Amount of the
Contract. A Contract will remain in force so long as its Net Cash Value
is sufficient to pay certain monthly charges imposed in connection with
the Contract.
During the "Free Look" period, Net Premiums are allocated to the Money
Market Division as specified in Appendix A. After the end of the "Free
Look" period, Net Premiums may be allocated to one or more of the
Available Divisions of the Separate Account or to the Fixed Fund. If Net
Premiums are allocated to the Separate Account, the duration of the
Contract and the amount of the Insurance Account Value will vary to
reflect the investment performance of the Available Divisions selected
by the Contract Holder, and depending on the Death Benefit option
elected, the amount of the Death Benefit above the minimum may also vary
with that investment performance. The Contract Holder bears the entire
investment risk for all amounts allocated to the Separate Account; there
is no minimum guaranteed Insurance Account Value.
Each Available Division of the Separate Account 13 will invest in one of
the Underlying Portfolios shown in Appendix A. The accompanying
Prospectuses for these portfolios describe the investment objectives and
policies, and the risks of the portfolios. This Prospectus generally
describes only the portion of the Contracts involving the Available
Divisions of the Separate Account. For a brief summary of the Fixed
Fund, see "The Fixed Fund."
<PAGE>
<PAGE>
It may not be advantageous to purchase a Contract as a replacement for
another type of life insurance or as a means to obtain additional
insurance protection if the purchaser already owns another Flexible
Premium Variable Life Insurance Contract. Within certain limits, a
Contract Holder may return the Contract, or convert it to a Contract
that provides benefits that do not vary with the investment results of
Available Divisions by exercising the Conversion Right.
This Prospectus must be accompanied or preceded by the current
prospectuses for the Underlying Portfolios listed in Appendix A.
The contract is not a deposit or obligation of, or guaranteed or
endorsed by, any bank or depository institution, and the contract is not
federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other agency, and involves investment
risk, including possible loss of principal amount invested.
These securities have not been approved or disapproved by the Securities
and Exchange Commission, nor has the Commission passed upon the accuracy
or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
The Contracts are not available in all states.
This Prospectus does not constitute an offering in any jurisdiction in
which such offering may not be lawfully made. No dealer, salesman, or
other person is authorized to give any information or make any
representations in connection with this offering other than those
contained in this Prospectus, and if given or made, such other
information or representations must not be relied upon.
Please read this Prospectus carefully and retain it for future
reference.
The date of this Prospectus is May 1, 1999.
- 2 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
----
Summary of Contract 6
Explanation of a Case
Purpose of the Contract
The Contract Holder and Beneficiary
Availability of the Contract
Joint Insureds
Contract Values
The Separate Account
Death Benefit
Premiums
Charges and Deductions
Contract Loans
Surrender and Partial Withdrawals
Termination
Illustrations
Replacement of Existing Coverage
Tax Considerations
Free Look and Conversion Rights
Definitions 14
Information About SELIC 19
The Separate Account 19
The Contract 20
Availability of Insurance Coverage
Evidence of Insurability
Premiums
Contract Values
Transfers
Contract Loan Privilege
Surrender and Partial Withdrawals
Death Benefits Under the Contract
Charges and Deductions 37
Premium Load
Daily Charges
- 3 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
Monthly Charges
Underwriting Charges
Annual Charges
Other Charges
Termination 44
Maturity Date
Termination for Insufficient Net Cash Value
Reinstatement of a Contract Terminated for Insufficient
Value
The Fixed Fund 45
General Description
Allocation of Amounts to the Fixed Fund
Fixed Fund Benefits
Fixed Fund Insurance Account Value
Fixed Fund Transfers, Surrenders, Partial Withdrawals
and Contract Loans
Federal Income Tax Considerations 49
Additional Provisions of the Contract 55
Addition, Deletion, or Substitution of Investments
Incontestability
Conversion Rights
Misstatement of Age or Sex
Suicide
Availability of Funds
Entire Contract
Representations in Application
Contract Application and Contract Schedules
Right to Amend Contract
Computation of Contract Values
Claims of Creditors
Notice
Assignments
Construction
Severability
State Variations
- 4 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
Unisex Requirements Under Montana Law 60
Records and Reports 60
Sale of the Contract 61
Voting Rights 61
State Regulation of the Company 62
Management of the Company 63
Legal Matters 65
Legal Proceedings 65
Experts 65
Additional Information 65
Financial Statements 66
Appendix A - Underlying Portfolios A-1
Appendix B - Contract Riders B-1
Appendix C - Illustrations of Death Benefits and Net
Insurance Account Value C-1
- 5 -
<PAGE>
<PAGE>
SUMMARY OF THE CONTRACT
Throughout this summary, the terms "you" and "your" refer to the owner
of the policy. The policy's owner may or may not be one of the persons
insured under the policy. The terms "we," "us," and "our" refer to
Security Equity Life Insurance Company.
The information in this section is just a summary, written in "laymen's
terms" to help you understand the policy. However, both your policy and
this prospectus are legal documents. If you have any questions about
them, you should contact your agent or other competent professional
advisers. You should see Appendix B for modifications to this summary in
the event that riders are added to the contract.
In preparing this summary, we assume that the policy is in force and
that you have not borrowed any of the cash value.
EXPLANATION OF CONTRACT AND CASE
The contract is the agreement between you and us under which we provide
benefits on the life of an insured. Although your contract is treated
as an individual contract, it is also linked to a case. A case is a
grouping of one or more contracts linked together by a non-arbitrary
factor, such as a common employer of each insured. We determine what
constitutes a case. A case may have one contract holder (i.e., a single
entity owns all the contracts in the case) or as many contract holders
as there are contracts in the case. We determine your contract's
premium load, minimum initial premiums, and underwriting standards based
on the characteristics of the case to which your contract belongs.
PURPOSE OF THE CONTRACT
The contract offers a means to obtain insurance protection on the life
of someone in whom you have an insurable interest. We will pay a death
benefit to the beneficiary upon the death of the insured, so long as the
contract remains in force. You may use the contract's accumulated
values and benefits for any valid purpose. Unlike traditional life
insurance, which provides a guaranteed insurance account value, your
insurance account value under the contract will vary to reflect the
investment results of the underlying funds and/or the interest credited
to the fixed fund, depending on which accounts you allocate your
premiums.
Life insurance is not a short-term investment. You should evaluate your
need for insurance and the contract's long-term investment potential and
risks before purchasing a contract.
- 6 -
<PAGE>
<PAGE>
THE CONTRACT HOLDER AND BENEFICIARY
The contract holder is the individual or entity named in the
application, unless subsequently changed on our records. The contract
holder retains all rights and responsibilities of ownership pertaining
to its interest in the contract. These right and responsibilities
include: (1) the right to allocate premiums among account options; (2)
the obligation to pay premiums; (3) the right to borrow against the
policy; (4) the right to take partial withdrawals; and (5) the right to
surrender the contract.
The beneficiary is also named in the application, unless subsequently
changed on our records. You have the right to change a revocable
beneficiary with prior written notice to us. The beneficiary will
receive the insurance benefits payable upon the death of the insured.
THE INSURED HAS NO DIRECT OR INDIRECT INTEREST IN THE CONTRACT, UNLESS:
- -----------------------------------------------------------------------
(1) YOU ARE THE INSURED, (2) YOU ASSIGN THE RIGHT TO DESIGNATE THE
- ------------------------------------------------------------------
BENEFICIARY TO THE INSURED, OR (3) YOU AND WE OTHERWISE AGREE.
- -------------------------------------------------------------
The contract is a long-term investment designed to provide a death
benefit to the beneficiary and should be purchased for this purpose.
You may use the death benefit and net cash value for various planning
purposes. However, the contracts are not liquid investments (partial
withdrawals may be currently taxable and contract loans and partial
withdrawals may significantly affect death benefits and cash value, and
cause the contract to lapse). In addition, if the performance of the
available divisions to which you allocate the insurance account value is
not sufficient to provide proceeds for your planning purpose, or if you
do not pay sufficient premiums, then your contracts may not achieve your
purpose and may lapse. Before you purchase for a specialized purpose,
you should consider whether the long-tem nature of the contracts and the
potential impact of any contemplated contract loans and partial
withdrawals are consistent with such purpose. Using the contracts for a
specialized purpose may also have tax consequences.
AVAILABILITY OF THE CONTRACT
We offer the contract only to individuals, corporations, partnerships,
sole proprietorships, associations, trusts, and other similar or related
entities, which meet certain suitability standards. You may purchase
the contract to acquire insurance on the life of a person in whom you
have an insurable interest. If you purchase a contract without an
insurable interest, you may incur adverse financial and tax
consequences.
JOINT INSUREDS
You may add a rider to the contract that provides insurance coverage on
the lives of two insureds. In such a contract, we will pay the death
benefit on the death of the last surviving insured. Most of the
discussions in this prospectus that reference a single insured may also
be read as though the single insured were the two insureds under a joint
contract. Certain discussions in the prospectus are modified if a joint
and last survivor rider is added to the contract. See Appendix B --
"Joint and Last Survivor Rider."
- 7 -
<PAGE>
<PAGE>
CONTRACT VALUES
You may allocate net premiums to one or more available divisions and/or
the fixed fund. To the extent you allocate net premiums to the
available divisions: (1) the insurance account value will, and the
death benefit may, vary with the investment performance of the chosen
available divisions; (2) you bear the entire investment risk associated
with the investments of the selected available divisions; and (3) there
is no guaranteed minimum insurance account value. To the extent you
allocate net premiums to the fixed fund, the insurance account value
will accrue interest at a guaranteed minimum rate.
THE SEPARATE ACCOUNT
You have several separate account divisions to which you can allocate
net premiums, subject to certain limitations set forth in the contract.
A list of the available divisions appears in Appendix A. Each available
division of the separate account invests its assets in shares or units
of an underlying portfolio managed by one or more investment managers.
Each underlying portfolio has a different investment objective which is
described in the prospectus for the underlying portfolio. The
underlying fund prospectuses accompany this prospectus.
We may add and/or delete available divisions from time to time. We will
notify you in writing of any such change.
DEATH BENEFIT
We will pay the death benefit to the named beneficiary upon the death of
the insured. The amount of the death benefit depends on which the death
benefit option is in effect. So long as the contract remains in force,
the minimum death benefit under each of the death benefit options will
be equal to at least the contract's current face amount.
PREMIUMS
You have considerable flexibility as to both the timing and the amount
of premium payments. We will not issue a contract unless we receive an
initial premium payment that is equal to at least one year's worth of
the contract's monthly charges plus any premium loads. We may allow a
reduced initial premium for certain contracts. Subsequent premium
payments must be at least $50. You may pay subsequent premiums at any
time and as often as you like, subject to certain restrictions. Please
see the "The Contract -- Premiums" section. If your initial and
subsequent premiums are too low, your insurance coverage may cease.
We will allocate your initial net premium to the money market division
during the free look period. After the free look period expires, you
may allocate the insurance account value among the available divisions
of the separate account and the fixed fund. Thereafter, you may
transfer the insurance account value among the available divisions of
the separate account and the fixed fund by written request, subject to
certain restrictions. You may transfer your insurance account value by
dollar amounts or by percentages.
- 8 -
<PAGE>
<PAGE>
CHARGES AND DEDUCTIONS
In order to cover our expenses, we deduct certain charges from your
premiums and insurance account value. We briefly describe these charges
below. For more detailed information, you should see the "Charges and
Deductions" section. For information regarding the investment advisory
fees and operating expenses of the underlying portfolios, you should see
the chart below.
The following table shows a summary of the operating expenses of the
funds as reported for the fiscal year ending December 31, 1998.
<TABLE>
- ----------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS
- ----------------------------------------------------------------------
<CAPTION>
INVESTMENT FUND TOTAL EXPENSE
- ----------------------------------------------------------------------
<S> <C>
Evergreen Variable Trust
- ----------------------------------------------------------------------
Evergreen VA Fund 1.0000%
- ----------------------------------------------------------------------
Evergreen VA Foundation Fund 1.0000%
- ----------------------------------------------------------------------
Evergreen VA Growth and Income Fund 1.0000%
- ----------------------------------------------------------------------
Frank Russell Investment Management Company
- ----------------------------------------------------------------------
Aggressive Equity Fund 1.2500%
- ----------------------------------------------------------------------
Core Bond Fund 0.8000%
- ----------------------------------------------------------------------
Multi-Style Equity Fund 0.9200%
- ----------------------------------------------------------------------
Non-U.S. Fund 1.3000%
- ----------------------------------------------------------------------
General American Capital Company
- ----------------------------------------------------------------------
Money Market Fund 0.2050%
- ----------------------------------------------------------------------
Variable Insurance Products Fund
- ----------------------------------------------------------------------
Equity-Income Portfolio 0.4863%
- ----------------------------------------------------------------------
Growth Portfolio 0.5863%
- ----------------------------------------------------------------------
High Income Portfolio 0.5824%
- ----------------------------------------------------------------------
Overseas Portfolio 0.7363%
- ----------------------------------------------------------------------
Variable Insurance Products Fund II
- ----------------------------------------------------------------------
Asset Manager Portfolio 0.5363%
- ----------------------------------------------------------------------
Index 500 Portfolio 0.2400%
- ----------------------------------------------------------------------
Investment Grade Bond Portfolio 0.4324%
- ----------------------------------------------------------------------
Contrafund Portfolio 0.5863%
- ----------------------------------------------------------------------
Variable Insurance Products Fund III
- ----------------------------------------------------------------------
Balanced Portfolio 0.4363%
- ----------------------------------------------------------------------
Janus Aspen Series
- ----------------------------------------------------------------------
Growth Portfolio 0.7000%
- ----------------------------------------------------------------------
Worldwide Growth Portfolio 0.7400%
- ----------------------------------------------------------------------
Balanced Portfolio 0.8300%
- ----------------------------------------------------------------------
</TABLE>
- 9 -
<PAGE>
<PAGE>
Premium Load. We deduct a premium load from your initial premium and
each subsequent premium. The premium load includes: (1) a distribution
charge, which consists of a premium expense load and a commission
charge; (2) a premium tax charge, which covers state premium taxes; and
(3) a federal tax charge.
In the first year, the distribution charge equals a maximum of 30% of
the premiums paid, up to one target premium, and 2% of premiums
thereafter. Thereafter, the distribution charge declines as a
percentage of premiums paid as follows:
* for years 2-10 the distribution charge equals a maximum of 10% of
premiums paid during each year, up to a target premium, and 2% of
premiums thereafter;
* for years 11-15 the distribution charge equals a maximum of 8% of
premiums paid during each year, up to a target premium, and 2% of
premiums thereafter; and
* for years 16 and thereafter the distribution charge equals a
maximum of 4% of premiums paid during each year, up to a target
premium, and 2% of premiums thereafter.
The premium tax charge reflects the state premium taxes imposed under
the contract. The federal tax charge equals 1% of all premiums paid in
all years.
Mortality and Expense. We charge a fee for the mortality and expense
that we assume under the contract. We calculate and deduct the daily
fee based upon a percentage of your insurance account value attributable
to each division of the separate account. Currently, this daily fee
equals 35 basis points (0.35%) on an annual basis. We guarantee that
this fee will not exceed 50 basis points (0.50%) on an annual basis.
Monthly Charges. We deduct monthly charges directly from your insurance
account value as of the contract date and each month thereafter.
Monthly charges include an administration charge of $4.50 per month
(guaranteed not to exceed $8.00 per month) and a charge for the cost of
insurance. Monthly charges also include any charges for additional
benefits provided by riders and charges for a special class rating, if
applicable.
Underwriting Charge. We will deduct an underwriting charge, not to exceed
$100, on the issue date of the contracts that we issue on a medically
underwritten basis. We deduct a similar charge following medical
underwriting in connection with certain changes in the contract. This
charge changes if you add a joint and last survivor rider. See Appendix B.
We may reduce or waive the underwriting charge under certain circumstances.
Loan Charges. On each anniversary of the contract, your insurance
account value is: (i) reduced by loan interest due and unpaid for the
previous year; and (ii) increased by the interest credited to the
borrowed fund during the previous year. As a result, if you do not pay
loan interest when due, then on the contract's anniversary, we will
reduce your insurance account value by the difference between the loan
interest due and unpaid for the previous year and the interest credited
to the borrowed fund during the previous year.
- 10 -
<PAGE>
<PAGE>
Other Charges. We do not currently charge a fee for federal, state, or
local taxes that we incur that may be attributable to the separate
account. However, we may impose such a charge in the future to provide
for any tax liability incurred by the separate account.
Investment advisory fees and operating expenses of the underlying
portfolio are paid out of the amounts invested in the portfolios. These
charges appear in Appendix A.
At your request, we will provide Policy illustrations in addition to the
reports we customarily provide. Depending upon the type and complexity
of the illustration, we may charge a reasonable fee, not to exceed $50.
CONTRACT LOANS
You may obtain a loan under your contract. The amount you may borrow is
subject to a maximum. Interest will be charged for any amount borrowed
in accordance with the loan interest rate option you select.
We will deduct the amount of a loan from: (1) the amount payable on
surrender of the contract; and (2) the death benefit proceeds. Interest
on loans accrues daily. Unpaid interest is capitalized each year and
added to the loan. Depending upon the investment performance of the
available divisions and the amounts borrowed, loans could cause your
contract to lapse. If your contract lapses with a loan outstanding, you
may be subject to adverse tax consequences. Contract loans may also have
other federal income tax consequences. Please see the "Federal Income
Tax Considerations" section.
SURRENDER AND PARTIAL WITHDRAWALS
As long as the insured is alive, you may surrender your contract for its
net cash value by submitting a written request to our home office. To
the extent that you have allocated your insurance account value to the
available divisions of the separate account, we do not guarantee a
minimum net cash value. As long as the insured is alive, you may
withdraw a portion your net cash value, subject to certain restrictions.
Please see the "The Contract -- Surrender and Partial Withdrawals"
section.
Surrender and partial withdrawals may have federal income tax
consequences. Please see the "Federal Income Tax Considerations"
section.
TERMINATION
The contract will not automatically terminate if you fail to pay
subsequent premiums. However, your contract may terminate prior to its
maturity date if it has insufficient net cash value to pay monthly
charges.
- 11 -
<PAGE>
<PAGE>
ILLUSTRATIONS
The illustrations provided in this prospectus or used in connection with
the purchase of your contract are based on hypothetical rates of return.
We provide these hypothetical rates of return only for the purposes
illustrating the contract. The rate are not guaranteed, nor should they
be deemed to be a representation of past or potential investment
performance. Your actual rates of return may be more or less than those
in the illustrations and, therefore, your actual values will be
different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a contract, you should consider whether it would be
more advantageous to change, or add to, an existing contract. It is
generally not advisable to purchase another insurance contract as a
replacement for existing coverage. You should carefully consider this
if your decision to replace a policy is based solely on a comparison of
contract illustrations.
TAX CONSIDERATIONS
We intend for the contract to satisfy the definition of "life insurance"
under Section 7702 of the Internal Revenue Code. Under certain
circumstances, a contract may be a "modified endowment contract" under
federal tax law. Whether a contract is a modified endowment contract
depends on the amount of premium payments made in relation to the death
benefit. We will monitor your contract and attempt to notify you on a
timely basis if your contract is in jeopardy of becoming a modified
endowment contract. The tax status of contracts issued with a
supplemental term insurance rider, or a joint and last survivor rider,
is less clear. For further discussion of the tax status of a contract
and the tax consequences of being treated as a life insurance contract
or a modified endowment contract, please see the "Federal Income Tax
Considerations" section.
FREE LOOK AND CONVERSION RIGHTS
In most states, you may cancel your contract within the later of: (1)
10 days after receiving it; (2) 10 days after we mail or personally
deliver the notice of withdrawal right to you; or (3) within 45 days
after the date of the application. If you wish to exercise your free
look rights, you must return your contract to us at our home office
along with written notice of cancellation. If you so cancel your
contract, it will be as though it had never been issued. We will pay
you a refund if you cancel your contract. The refund will equal any
premium(s) paid, minus any partial withdrawals and loans together with
accrued but unpaid interest.
Once the contract is issued and is in force, you may transfer all of
your insurance account value out of the separate account and into the
fixed fund and receive fixed and guaranteed benefits during the first 24
months of the contract. Once you exercise this right, you will not be
able to transfer amounts out of the fixed fund and all net premiums paid
thereafter will be allocated to the fixed fund.
- 12 -
<PAGE>
<PAGE>
DEFINITIONS
See Appendix B for modifications to Definitions in the event that riders
are added to the Contract.
ATTAINED AGE: The Insured's Issue Age under the Contract plus the
number of completed Contract Years.
APPLICATION: The application form that must be completed by any
purchaser of the Contract, before the Contract can be issued.
AVAILABLE DIVISION: A Division of the Separate Account to which Net
Premiums may be allocated or Separate Account Value or Fixed Fund
Insurance Account Value may be transferred under the Contracts. Each
Available Division invests exclusively in the shares of a corresponding
Underlying Portfolio listed in Appendix A.
BENEFICIARY: The person(s), entity or entities named on SELIC's records
to receive the insurance proceeds payable under the Contract after the
Insured dies.
BORROWED FUND: An account established in SELIC's General Account for
any amounts transferred from the Available Divisions and the Fixed Fund
and held as collateral for Contract Loans. (See "Contract Loan
Privilege").
CASE: A grouping of one or more Contracts connected by a non-arbitrary
factor, presented to SELIC as a group. (An example of such a factor is a
common employer for the Insureds under each Contract in the grouping).
(See "Explanation of a Case").
CONTRACT: The Flexible Premium Variable Life Insurance Contract offered
by SELIC that is described in this Prospectus.
CONTRACT ANNIVERSARY: An anniversary of the Contract Date. It marks
the start of a new Contract Year.
CONTRACT DATE: The date used to begin calculating Monthly Charges and
Annual Charges under the Contract. The Contract Date is shown in the
Contract.
CONTRACT HOLDER: The owner of the Contract, as shown in the records of
SELIC. All of the rights and benefits of the Contract belong to the
Contract Holder, unless otherwise stated in the Contract.
CONTRACT LOAN: An amount borrowed by the Contract Holder from the
Insurance Account Value of the Contract.
CONTRACT MONTH: Each one month period commencing on the Contract Date
and on each Monthiversary thereafter.
- 13 -
<PAGE>
<PAGE>
CONTRACT YEAR: Each successive twelve month period starting on the
Contract Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit payable to the Beneficiary when the Insured
dies.
DEATH BENEFIT OPTION ACCUMULATION RATE: The rate at which Premiums are
accumulated for purposes of calculating Death Benefit Option 3.
DIVISION: A sub-account of the Separate Account. Only Available
Divisions (described in this Prospectus) are available for investment
under the Contracts.
EMPLOYER: A corporation, partnership, sole proprietorship, association,
trust, and other similar or related entity. Affiliated Employers are
considered one Employer.
EXCESS PREMIUM: Any amount of Premium paid in a Contract Year over and
above the Target Premium.
FACE AMOUNT: The amount of insurance under the contract, excluding any
Supplemental Term Insurance Amount. The Initial Face Amount on the
Issue Date is shown in the Contract. Thereafter, it may change in
accordance with the terms of the Contract.
FIXED FUND: The portion of the Insurance Account Value allocated to the
Company's General Account (excluding the Borrowed Fund).
GOVERNING JURISDICTION: The state or jurisdiction in which the Contract
is delivered and whose laws govern its terms. The Governing
Jurisdiction is set forth in the Contract.
HOME OFFICE: The principal administrative office of SELIC, which is
located at 84 Business Park Drive, Suite 303, Armonk, NY 10504.
INITIAL NET PREMIUM: The Initial Premium paid under the Contract less
the applicable Premium Load.
INITIAL PREMIUM: The first Premium paid under the Contract.
INSURANCE ACCOUNT VALUE: The total amount that a Contract provides for
investment at any time. It is equal to the total of the amounts
credited to the Contract Holder in the Separate Account, the Fixed Fund,
and the Borrowed Fund.
INSURED: The person whose life is insured under the terms of the
Contract. The Insured is shown in the Contract.
ISSUE AGE: The Insured's age at his/her nearest birthday as of the
Contract Date.
- 14 -
<PAGE>
<PAGE>
ISSUE DATE: The day the Initial Premium is received and accepted by
SELIC. This is also the date that insurance coverage becomes effective.
All Contract values based on the Separate Account are determined
beginning on the Issue Date. The Issue Date is shown in the Contract.
MATURITY DATE: The date on which the Contract will mature. The
Maturity Date is shown in the Contract.
MAXIMUM LOAN AMOUNT: The maximum amount of Insurance Account Value that
can be borrowed by the Contract Holder under the Contract.
MINIMUM INSURANCE COVERAGE: The minimum amount of Total Insurance
Coverage, which includes any Supplemental Term Insurance Amount, under
the Contract. It is currently $25,000.
MINIMUM PREMIUM: The Minimum Premium is equal to the Minimum Net
Premium plus any applicable Premium Load.
MINIMUM NET PREMIUM: The Minimum Net Premium at any time is equal to 12
times the Monthly Charges for the first month in the then current
Contract Year.
MONTHIVERSARY: The first day of each Contract Month. It is the day as of
which Monthly Charges are deducted from the Insurance Account Value. The
Monthiversary and the Contract Date coincide, except in months in which
the Monthiversary falls on a day which is not a Valuation Day. In such
months, the Monthiversary is deemed to fall on the next Valuation Day.
If any Monthiversary would fall on the 29th, 30th or 31st of a month
that does not have that number of days, then the Monthiversary is deemed
to be the last day of that month.
MONTHLY CHARGES: The Contract charges that are deducted monthly from
Insurance Account Value. Monthly Charges include the Administration
Charge, the Cost of Insurance Charge, any Monthly Charges for benefits
provided by Contract rider, and any charges for special insurance class
rating. (See "Charges and Deductions").
NET AMOUNT AT RISK: The Net Amount at Risk is calculated on any
Monthiversary by subtracting the Insurance Account Value from the Death
Benefit, discounted one month at a 4.00% assumed annual effective
interest rate.
NET CASH VALUE: The Contract's Insurance Account Value minus any
Contract Loan balance and interest accrued thereon and unpaid.
NET PREMIUM: The amount of a Premium less applicable Premium Load.
PLANNED RENEWAL PREMIUM: An amount of Premium, specified in the
Application, which the Contract Holder anticipates will be paid in each
Contract Year after the first.
- 15 -
<PAGE>
<PAGE>
PREMIUM: Premiums are the payments made to SELIC under the Contract by
the Contract Holder to purchase insurance on the life of the Insured and
to contribute to the Insurance Account Value of the Contract. Each
Premium amount may consist of Target Premium, Excess Premium, or both.
PREMIUM LOAD: An amount deducted from each Premium prior to allocation
of the Premium to the Separate Account and/or the Fixed Fund. Premium
Load includes the Distribution Charge (comprised of a Premium Expense
Load and a Commission Charge), a Premium Tax Charge and a DAC Tax
Charge.
SELIC: Security Equity Life Insurance Company, the issuer of the
Contract.
SEPARATE ACCOUNT: A separate investment account established by the
Board of Directors of SELIC to support the benefits payable under the
Contract. Each Available Division of the Separate Account invests in a
single corresponding Underlying Portfolio.
SEPARATE ACCOUNT VALUE: The portion of the Contract's Insurance Account
Value invested in the Separate Account. It will be equal to the
Contract's Insurance Account Value, less the total of amounts in the
Borrowed Fund and in the Fixed Fund.
SUPPLEMENTAL TERM INSURANCE AMOUNT: The amount of insurance is provided
by the Supplemental Term Insurance Rider, if any. This amount is shown
in the Contract. The Supplemental Term Insurance Rider is described in
Appendix B.
TARGET PREMIUM: An amount of Premium used to determine Premium Loads
under the Contract. The annual Target Premium is based upon the Face
Amount and is shown in the Contract. For Contracts with a Face Amount
equal to the Minimum Face Amount, the Target Premium will be zero (0).
TOTAL INSURANCE COVERAGE: Total amount of insurance, including coverage
provided by any Supplemental Term Insurance Rider under the Contract.
UNDERLYING PORTFOLIO: An investment portfolio, managed by one or more
investment managers, the shares or units of which comprise the
investment of an Available Division of the Separate Account.
VALUATION DAY: A day that is a regular business day of SELIC and that
the New York Stock Exchange (or its successor) is open for trading.
Each Valuation Day ends at the Valuation Time.
VALUATION TIME: The close of trading on the New York Stock Exchange (or
any successor exchange), which is generally 4 p.m. Eastern Time.
VALUATION PERIOD: The period of time between Valuation Days. A
Valuation Period begins immediately after the Valuation Time on the
previous Valuation Day and ends as of the Valuation Time on the next
succeeding Valuation Day.
- 16 -
<PAGE>
<PAGE>
INFORMATION ABOUT SELIC
SELIC is a stock life insurance company domiciled in New York. It is an
indirect subsidiary of GenAmerica Corporation, an intermediate stock
holding company, which is, in turn, wholly-owned by General American
Mutual Holding Company, a mutual holding company organized under
Missouri law.
SELIC was established in 1983 as a wholly-owned subsidiary of Security
Mutual Life Insurance Company of New York.
SELIC is admitted to sell life insurance and annuities in 40 states and
the District of Columbia. SELIC concentrates on sales of corporate
owned life insurance products in all of these jurisdictions and sales of
individual products to residents of New York.
THE SEPARATE ACCOUNT
Security Equity Life Insurance Company Separate Account 13 (the "Separate
Account") was established by SELIC as a Separate Investment Account on
December 30, 1994. The Separate Account will receive and invest the Net
Premiums paid under this Contract and allocated to it. In addition, the
Separate Account may receive and invest Net Premiums for other flexible
premium variable life insurance contracts that might be issued by SELIC.
The Separate Account is currently divided into a number of Divisions. Not all
Divisions are available for allocation of Net Premiums and transfers under
the Contract. Each Available Division invests exclusively in shares of an
Underlying Portfolio listed in Appendix A. Both realized and unrealized gains
or losses and income from the assets of each Division of the Separate Account
are credited to or charged against that Division without regard to income,
gains, or losses from any other Division of the Separate Account or from any
other business SELIC may conduct.
Obligations to Contract Holders and Beneficiaries that arise under the
Contract are obligations of SELIC. SELIC owns the assets of the Separate
Account. Those assets will
- 17 -
<PAGE>
<PAGE>
only be used to support variable life insurance contracts and for any other
purposes permitted by applicable laws and regulations. The portion of the
assets of the Separate Account equal to the reserves and other contract
liabilities with respect to the Separate Account will not be charged with
liabilities that arise from any other business SELIC may conduct. SELIC
may, however, transfer from the Separate Account to its General Account
assets that exceed the reserves and other contract liabilities in respect
of the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Separate Account meets
the definition of a "separate account" under the federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices of the Separate Account, the Contracts, or SELIC by the
Commission.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES OF ANY UNDERLYING PORTFOLIO
WILL BE ACHIEVED.
Detailed information concerning the investment objectives, techniques and
restrictions pertaining to each Underlying Portfolio, and the expenses,
investment advisory services, and risks attendant to allocating Insurance
Account Value to each Underlying Portfolio, can be found in the current
prospectus with respect to each Underlying Portfolio, which accompanies this
Prospectus, and the current Statement of Additional Information for each
Underlying Portfolio. Such information has been prepared by the Underlying
Portfolio or the investment company of which it is a part, and SELIC is not
responsible for preparing this information. The Underlying Portfolio
prospectuses should be read carefully before any decision is made concerning
the allocation of Premium payments or transfers among the Available
Divisions.
Not all of the investment portfolios described in the accompanying
prospectuses are necessarily available under the Contract. Moreover, SELIC
cannot guarantee that each Underlying Portfolio will always be available for
the Contract. In the unlikely event that an Underlying Portfolio becomes
unavailable, SELIC will attempt to secure the availability of a comparable
Underlying Portfolio. Shares and units of each Underlying Portfolio are
purchased and redeemed at Net Asset Value, without a sales charge.
One or more of the Underlying Portfolios are available for investment by both
variable life insurance and variable annuity separate accounts. It is
conceivable that in the future it may be disadvantageous for both variable
life and variable annuity separate accounts to invest simultaneously in an
Underlying Portfolio that sells its shares to both types of separate
accounts. The Board of Directors or Trustees of such Underlying Portfolios,
the respective investment advisers of each Underlying Portfolio, and SELIC
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events of conflicts. Material conflicts
could arise from such things as changes in state insurance
-18-
<PAGE>
<PAGE>
laws, changes in federal income tax laws, changes in the investment
management of an Underlying Portfolio, or differences in the voting
instructions given by variable annuity contract owners and variable life
insurance contract owners. In the event of a material irreconcilable
conflict, SELIC will take steps necessary to protect our Contract Holders.
This could include discontinuance of investment in an Underlying Portfolio.
THE CONTRACT
The Contract is a flexible premium variable life insurance contract that
provides insurance on the life of an Insured. A Contract may be sold
together with other related Contracts forming a Case. See Appendix B for
modifications to this Section in the event that a Joint and Last Survivor
Rider and/or a Supplemental Term Insurance Rider is added to the Contract.
AVAILABILITY OF INSURANCE COVERAGE
To be eligible for insurance under the Contract, a prospective Insured must
on the Contract Date:
(1) be at least 20 years of age and no more than 85 years of age;
(2) have elected or consented to be an Insured (if required by SELIC or the
Governing Jurisdiction); and
(3) have satisfied any necessary underwriting requirements of SELIC (see
"Charges and Deductions -- Monthly Charges -- Cost of Insurance
Charge").
A Contract can be issued if the Contract Holder:
(1) provides SELIC with the data it requires including, but not limited to
the prospective Insured's name, address, social security number, sex,
date of birth, smoker/nonsmoker status, and citizenship (SELIC may also
require submission of related documents that have been completed by the
prospective Insured);
(2) requests Total Insurance Coverage at least equal to the Minimum
Insurance Coverage for an Insured;
(3) designates the Beneficiary under the Contract; and
(4) pays the initial Minimum Premium for the first Contract Year.
Insurance coverage generally begins on the Issue Date for the Contract.
Temporary life insurance coverage may be provided under the terms of a
temporary insurance agreement. In accordance with SELIC's underwriting rules,
temporary life insurance coverage may not exceed the greater of $100,000 or
two times the Premium paid, and may not be in
-19-
<PAGE>
<PAGE>
effect for more than 90 days. This temporary insurance coverage will be
issued on a conditional receipt basis, which means that any Death Benefit
under such temporary coverage will only be paid if the Insured meets SELIC's
usual and customary underwriting standards for the applied-for coverage
under the Contract (see "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge").
As provided for under state insurance law, a Contract Holder, to preserve
insurance age of the Insured, may be permitted to backdate the Contract. In
no case may the Contract Date be more than six months prior to the date that
the Application was completed. If any Contract in a Case is backdated,
then all Contracts in the Case must be backdated to the same date. Monthly
Charges for the backdated period will be deducted as of the Contract Date,
and each Monthiversary thereafter.
For modifications to this Section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider."
EVIDENCE OF INSURABILITY
SELIC may require medical evidence of insurability for any Contract that does
not meet SELIC's guaranteed issue or simplified issue standards when the
Contract is issued. (See "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge"). Medical evidence of insurability may also be required
for any transaction that increases the Net Amount at Risk for the Contract.
Transactions that increase the Net Amount at Risk may include but are not
limited to: payment of subsequent Premiums, change of Death Benefit Option,
change of Face Amount, partial withdrawals, and reinstatement of a Contract.
For modifications to this section for Joint Insureds, see Appendix B -- Last
Survivor Rider.
PREMIUMS
Premiums are the payments made to SELIC under the Contract to purchase
insurance on the life of the Insured and to contribute to the Insurance
Account Value of the Contract. All Premiums are payable to SELIC at its Home
Office. A Premium Load is deducted from any Premium received by SELIC prior
to its allocation to the Separate Account or to the Fixed Fund. The
resulting amount is the Net Premium. The applicable Premium Load percentage
depends upon the Case to which the Contract belongs, whether the Premium
consists of Target Premium or Excess Premium, and the Contract Year in which
the Premium is paid. (See "Charges and Deductions -- Premium Load).
Premiums may consist of Target Premium, Excess Premium or both. The Target
Premium depends upon the Insured's Issue Age, sex, underwriting class and
Face Amount. The Target Premium for the initial Face Amount is determined to
be the level annual premium payable to age 100 for a level death benefit that
under guaranteed cost of insurance rates and guaranteed policy expense
charges and a 4.00% net interest rate (after the M&E
-20-
<PAGE>
<PAGE>
charge) the cash value will accumulate to equal the initial Face Amount at
age 100. The Target Premium is determined on the Issue Date. It is not
recalculated if there is an increase in the Face Amount. It is recalculated
if there is a decrease in the Face Amount, but only if the new Face Amount
is below the initial Face Amount. The amount of the Target Premium is shown
in your policy.
SELIC has the right to refund promptly any amount of Premium paid if
necessary to keep the Contract in compliance with state and federal laws,
including federal income tax laws. In particular, if a Contract Holder pays
Premium amounts during the first Contract Year significantly in excess of the
Planned Renewal Premium, SELIC reserves the right to refund promptly part or
all of such excess if applicable state insurance law restricts the amount of
commissions that would otherwise be payable to the writing agent in
connection with part or all of such Premium amounts.
SELIC will not issue the Contract unless it receives a Premium payment at
least equal to the initial Minimum Premium amount. The initial Minimum
Premium under the Contract is equal to twelve times the Monthly Charges due
under the Contract in the first Contract Month, plus any applicable Premium
Load. SELIC may, in its sole discretion, require a reduced initial Minimum
Premium in connection with the purchase of Contracts sold by licensed agents
of SELIC that are also registered representatives of Walnut Street
Securities, Inc. ("Walnut Street"), the distributor of the Contracts, or
selected broker-dealers or through banks that have entered into written sales
agreements with Walnut Street.
After the Initial Premium has been received and accepted by SELIC, the
Contract Holder may pay subsequent Premiums on any Valuation Day provided
that each subsequent Premium is at least $50 per Contract. All payments
received by SELIC from the Contract Holder will be credited to the Contract
as Premiums, unless the Contract Holder specifies that such payments are
Contract Loan repayments. Subsequent Premiums may cause a Contract that was
not classified as a "modified endowment contract" to become classified as
such a contract. SELIC will take steps to monitor subsequent Premiums, and
will notify a Contract Holder if a subsequent Premium, or a portion thereof,
would cause a Contract to become a modified endowment contract. (See "Federal
Income Tax Considerations -- Modified Endowment Contracts").
ALLOCATION OF NET PREMIUMS: Generally, the initial Net Premium will be
credited to the Money Market Division of the Separate Account and the
Insurance Account Value will begin to vary with investment experience on the
Valuation Day next following receipt of the initial payment at the Home
Office. However, in situations where SELIC receives the initial payment with
the application and underwriting is required, then the payment will be held
on deposit in SELIC's General Account until underwriting is completed and the
Contract is issued (the Issue Date). Any Net Premiums received during the
Free Look period will be allocated to the Money Market Division. At the end
of such period, Separate Account Value will be allocated to or among any of
the Available Divisions and the Fixed Fund, in accordance with the Contract
Holder's allocation instructions set forth in the Application, or as
subsequently changed prior to the end of the Free Look period.
-21-
<PAGE>
<PAGE>
No allocation or transfer instructions received from the Contract Holder
in the Application or during the Free Look period will be acted upon until
the Free Look period has expired. The duration of the Free Look period
depends upon the law of a Contract's Governing Jurisdiction. The Free Look
period under a Contract will expire after the number of days provided
for in the applicable Governing Jurisdiction's Free Look period has elapsed
following the date the Contract is delivered to the Contract Holder, as
evidenced by a signed delivery receipt or certified mail return receipt, or if
later, 10 days after SELIC mails or personally delivers the Notice of
Withdrawal Right to the Contract Holder, or 45 days after the Application is
signed. Transfer of money to the Available Divisions and, or the Fixed Fund
specified by the Contract Holder will occur at the expiration of the Free Look
period.
If you decide to cancel your contract during the free look period, we will pay
you a refund. The refund will equal any premium(s) paid, minus any partial
withdrawals and loans together with accrued but unpaid interest.
Net Premiums received after the Free Look period expires will be allocated
among the Available Divisions and the Fixed Fund in accordance with the
Contract Holder's instructions. Net Premiums that are received prior to the
Valuation Time on any Valuation Day will be allocated as of the date they are
received. Net Premiums received after such time will be allocated on the
next Valuation Day.
The maximum number of Available Divisions to which the Contract's Separate
Account Value may be allocated at any one time is five; amounts can also be
allocated to the Fixed Fund. If no instructions accompany a Premium, the
resulting Net Premium will be allocated to the Available Divisions and the
Fixed Fund in the same proportions as stated in the most recently recorded
Premium allocation instructions SELIC received from the Contract Holder.
The allocation of subsequent Premiums may be changed at any time upon SELIC's
receipt of written notice from the Contract Holder.
PREMIUMS TO PREVENT LAPSE: If the Contract is in danger of lapsing because
the Net Cash Value is insufficient to pay the Monthly Charges for the
Contract on a Monthiversary, the amount of Premium that must be paid to
prevent lapse will be equal to three times the Monthly Charges then due plus
any applicable Premium Load. (See "Termination -- Termination for
Insufficient Cash Value"). SELIC will send a notice to a Contract Holder
when such Premiums are required to keep the Contract in force.
PREMIUMS TO REINSTATE A CONTRACT: When a Contract has lapsed due to
insufficient Net Cash Value, the amount of Premium that must be paid to
reinstate insurance coverage will be equal to the Monthly Charges due and
unpaid at the time of lapse, plus three times the Monthly Charges due at the
time of reinstatement, plus any applicable Premium Load. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient Value). When the
Contract has terminated, SELIC will send a notice specifying the Premiums
that are required to be paid to reinstate the Contract.
-22-
<PAGE>
<PAGE>
CONTRACT VALUES
The Insurance Account Value of the Contract is equal to the total amounts of
the Insurance Account Value in each Available Division of the Separate
Account, the Insurance Account Value in the Fixed Fund, and the Insurance
Account Value in the Borrowed Fund.
The Insurance Account Value allocated to each Available Division is measured
in "Accumulation Units." The value of an Accumulation Unit is determined as
of the Valuation Time on each Valuation Day. The value of any unit will vary
from Valuation Day to Valuation Day to reflect the investment performance of
the Available Division applicable to that Accumulation Unit.
The value of an Accumulation Unit in each Available Division is arbitrarily
set at $1.00 on the first Valuation Day for that Available Division. The
value of any Accumulation Unit on any subsequent Valuation Day is equal to
its value on the preceding Valuation Day multiplied by that Available
Division's Net Investment Factor for the Valuation Period. The Net
Investment Factor for an Available Division for a Valuation Period equals the
"gross investment rate" for such period plus one and minus the Mortality and
Expense Risk Charge for that Valuation Period.
The "gross investment rate" of an Available Division for any Valuation Period
is equal to the net earnings of that Available Division during the Valuation
Period, divided by the value of the total assets of that Available Division
at the beginning of the Valuation Period. The net earnings of each Available
Division during a Valuation Period are equal to the accrued investment income
and capital gains and losses (realized and unrealized) of that Available
Division, reduced by any amount charged against that Available Division for
premium taxes or other governmental charges paid or reserved by SELIC during
that Valuation Period.
The "gross investment rate" and net earnings of each Available Division will
be determined by SELIC in accordance with generally accepted accounting
principles and applicable laws, rules and regulations.
Transactions which require the crediting and canceling of Accumulation Units
will be processed as of the Valuation Time on the Valuation Day in which the
transaction is effected. Premium payments, and requests for Contract Loans,
withdrawals, transfers, or any other transaction, received in proper form
before the Valuation Time on a Valuation Day will be effected as of the
Valuation Time on the day that the Premium payment, or transaction request,
is received. Premium payments, and transaction requests, received in proper
form after the Valuation Time on a Valuation Day, will be effected as of the
Valuation Time of the following Valuation Day.
The Insurance Account Value in the Money Market Division on the Issue Date is
equal to the Premium paid on that date, less any applicable Premium Load
less:
-23-
<PAGE>
<PAGE>
(1) Cost of Insurance Charges;
(2) Administration Charges;
(3) Any charges that are deducted from the Insurance Account Value for
benefits provided by Contract riders;
(4) Underwriting Charges, if any; and
(5) Charges for Special Insurance Class Rating, if any.
The Insurance Account Value in each Available Division as of the Valuation
Time on any subsequent Valuation Day is equal to the Insurance Account Value
in that Available Division on the prior Valuation Day plus:
(1) Any new Net Premium allocated to that Available Division;
(2) Any amounts transferred to that Available Division from another
Available Division, the Fixed Fund or the Borrowed Fund; and
(3) Any increase in value of the Available Division's investments due to
investment results (net of Daily Charges);
and less:
(1) Any amounts transferred from that Available Division to another
Available Division, the Fixed Fund or the Borrowed Fund;
(2) Any decrease in the value of the Available Division's investments due
to investment results net of Daily Charges;
(3) The Cost of Insurance Charges allocated to that Available Division
(deducted only on a Monthiversary);
(4) The Administration Charges allocated to that Available Division
(deducted only on a Monthiversary);
(5) Any partial withdrawals taken from such Contract and allocated to that
Available Division;
(6) Any charges allocated to that Available Division that are deducted from
the Insurance Account Value for benefits provided by Contract riders;
(7) Any Underwriting Charges allocated to that Available Division;
-24-
<PAGE>
<PAGE>
(8) Any charges for Special Insurance Class Rating allocated to that
Available Division (deducted only on a Monthiversary); and
(9) Any other charges allocated to that Available Division as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
For description of the Insurance Account Value in the Fixed Fund and the
Borrowed Fund, see "The Contract -- The Fixed Fund" and "Contract Loan
Privilege."
TRANSFERS
The Contract provides that all or part of the Insurance Account Value (except
amounts in the Borrowed Fund) may be transferred between or among Available
Divisions and the Fixed Fund on any Valuation Day subject to the following
limitations:
(a) The Insurance Account Value cannot be allocated to more than five
Available Divisions and the Fixed Fund at any one time;
(b) Transfer requests must be in writing and in a form acceptable to SELIC;
(c) Except as described below, only one transfer is permitted in each
Contract Year;
(d) SELIC reserves the right to limit the amount of any transfer.
Transfers from or among the Available Divisions must be in amounts of
at least $500, or, if smaller, the Insurance Account Value in an
Available Division; and
(e) Transfers to the Fixed Fund may be limited. Insurance Account Value in
the Fixed Fund after any transfer to the Fixed Fund may be no greater
than the amount specified in the Contract. (See "The Fixed Fund --
Allocation of Amounts to the Fixed Fund").
Transfers from the Fixed Fund are also subject to the following limitations:
(a) The transfer must be made in the 30 day period following a Contract
Anniversary; and
(b) The amount transferred may be no larger than 25% of the Insurance
Account Value in the Fixed Fund on the date of the transfer.
-25-
<PAGE>
<PAGE>
Transfers may be requested by dollar amount or whole percentage. SELIC will
execute a transfer only upon receipt of a properly executed transfer request.
Written confirmation of each transfer will be sent to the Contract Holder.
Notwithstanding the above limitations, which are set forth in the Contract,
SELIC will, as a matter of administrative practice, allow up to 12 transfers
per year between or among Available Divisions. Contract Holders will be
notified in advance if this administrative practice is changed or eliminated.
For purposes of calculating the number of transfers requested in any Contract
Year, all transfer requests received on the same Valuation Day will be
counted as one transfer request. Transfers effected in connection with
Contract Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers permitted in each Contract Year.
CONTRACT LOAN PRIVILEGE
The Contract Holder may request a loan against the Contract. The Contract
must be assigned to the Company as the sole security for the Contract Loan.
A Contract Loan may take place on any Valuation Day. An amount equal to the
amount borrowed will be transferred from the Separate Account and the Fixed
Fund to the Borrowed Fund. The Borrowed Fund is a portion of SELIC's General
Account reserved for amounts held as collateral for Contract Loans. A
Contract Loan from, or secured by, the Contract may have federal income tax
consequences. In particular, if the Contract is a "modified endowment
contract" loans may be currently taxable and subject to a 10% penalty tax.
(See "Federal Income Tax Considerations").
SOURCE OF CONTRACT LOAN: Insurance Account Value equal to each Contract Loan
will be transferred to the Borrowed Fund, reducing the Insurance Account
Value in the Separate Account and the Fixed Fund. Unless other specific
instructions are received from the Contract Holder, the Contract Loan will be
taken from the Available Divisions of the Separate Account and the Fixed Fund
in proportion to the amount of the Contract Holder's then current Insurance
Account Value in each Available Division of the Separate Account and Fixed
Fund.
The maximum total of Contract Loans for each Contract is equal to the
Insurance Account Value less the sum of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with interest accrued but
unpaid; and
(3) Contract Loan interest charges until the next Contract Anniversary.
If a Contract Loan is requested that would cause this maximum to be exceeded,
SELIC will not process the request.
-26-
<PAGE>
<PAGE>
CONTRACT LOAN INTEREST: Contract Loan interest accrues daily and is due on
each Contract Anniversary. If it is not paid when due, the Contract Loan
interest will be added to the Contract Loan and, as part of the Contract
Loan, will bear the same interest rate. Any Contract Loan interest
capitalized on a Contract Anniversary will be treated as if it was a new
Contract Loan and will be transferred from the Available Division of the
Separate Account and Fixed Fund in proportion to the Insurance Account Value
therein.
A fixed Contract Loan interest rate option or a variable Contract Loan
interest rate option may be elected. This option may be changed by the
Contract Holder on any Contract Anniversary. Written notice of the change
must be received at SELIC's Home Office no more than 90 days nor less than 30
days prior to such Contract Anniversary. The Contract Loan interest rate
options are as follows:
Fixed Contract Loan Interest Rate. If a Fixed Contract Loan Interest Rate
- ----------------------------------
option is selected and a Contract Loan is outstanding, a fixed Contract Loan
interest rate of 6.00% will be assessed annually in arrears and added to the
Contract Loan principal on the Contract Anniversary.
Variable Contract Loan Interest Rate. On each Contract Anniversary, SELIC
- -------------------------------------
will declare the Variable Contract Loan Interest Rate that will apply to
outstanding Contract Loans for the next Contract Year. This rate will equal
the higher of a) or b), where a) is the Monthly Average of the Composite
Yield on Corporate Bonds as published by Moody's Investor Service, Inc. (or,
if it is no longer published, a substantially similar average) for the
calendar month ending two months before the Contract Year begins, and b) is
4.50%. If the rate calculated according to this formula is not at least .50%
higher than the rate in effect for the previous year, SELIC will not increase
the rate. If the rate calculated is at least .50% lower than the rate in
effect for the previous year, SELIC will decrease the rate.
If the Variable Contract Loan Interest Rate option is selected, SELIC will
inform the Contract Holder of the current Variable Contract Loan Interest
Rate at the time a Contract Loan is made. The current Variable Contract Loan
Interest Rate can be changed by SELIC on any Contract Anniversary, but the
rate will never exceed the maximum Contract Loan interest rate permitted by
the law of the Governing Jurisdiction.
INTEREST ON BORROWED FUND: Interest will be credited to amounts held in the
Borrowed Fund as collateral for Contract Loans. This rate of interest
credited on the Borrowed Fund will be at least equal to an annual effective
rate of 4.00%.
For the Fixed Contract Loan Interest Rate option, the rate of interest
credited on the Borrowed Fund is currently set equal to 5.65%. If a Variable
Contract Loan Interest Rate option is chosen, SELIC currently anticipates
that the rate of interest credited on the Borrowed Fund will equal the
Variable Contract Loan Interest Rate less a "loan interest spread" of .35%.
This "loan interest spread" is guaranteed never to exceed .50%. The
-27-
<PAGE>
<PAGE>
Borrowed Fund crediting rate may not be changed more frequently than
annually. Any change in the Borrowed Fund crediting rate for the Contract
will be effective on a Contract Anniversary. The Contract Holder will be
notified in advance of any such change.
Interest credited to the Borrowed Fund will be transferred to the Available
Divisions of the Separate Account and Fixed Fund on each Contract
Anniversary. The amount so transferred will be allocated among the Available
Divisions of the Separate Accounts and Fixed Fund in proportion to the
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
If Contract Loan interest due for the previous Contract Year has not been
paid when due, then on the Contract Anniversary, the Insurance Account Value
attributable to the Separate Account and Fixed Fund will be reduced by the
difference between the Contract Loan interest due and unpaid for the previous
Contract Year, and the interest credited to the Borrowed Fund during the
previous Contract Year.
On any given day the Insurance Account Value in the Borrowed Fund will be
equal to the Insurance Account Value in the Borrowed Fund on the previous day
plus:
(1) Any new amounts transferred to the Borrowed Fund from the Separate
Account and Fixed Fund due to new Contract Loans and/or capitalized
Contract Loan Interest; and
(2) Any interest credited to the Borrowed Fund.
and less:
(1) Any amounts transferred from the Borrowed Fund to the Separate Account
and/or Fixed Fund due to Contract Loan repayments or the transfer of
interest credited to the Borrowed Fund on a Contract Anniversary.
REPAYMENT: All funds received by SELIC will be credited to the Contract as
Premiums unless clearly designated as a Contract Loan repayment by the
Contract Holder.
All or part of the Contract Loan plus accrued Contract Loan interest may be
repaid at any time while the Contract is in force.
Any repayment of a Contract Loan will result in the transfer of values equal
to the repayment out of the Borrowed Fund and the application of those values
to the Available Divisions of the Separate Account and Fixed Fund. Unless
other specific instructions are received from the Contract Holder, these
values will be applied to the Separate Account's Available Divisions and the
Fixed Fund in proportion to the amount of the Contract Holder's then current
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
-28-
<PAGE>
<PAGE>
SURRENDER AND PARTIAL WITHDRAWALS
At any time during the lifetime of the Insured and while the Contract is in
force, the Contract may be surrendered for its Net Cash Value on any
Valuation Date. The Contract Holder must request a surrender in writing and
in a form acceptable to SELIC. On surrender, SELIC will pay to the Contract
Holder in a single sum the Contract's Net Cash Value as of the Valuation Day
during which a proper surrender request is received. A Contract's Net Cash
Value is the Insurance Account Value less any outstanding Contract Loan and
accrued and unpaid Contract Loan interest. If a proper surrender request is
received on a Monthiversary, then Monthly Charges will not be deducted on
that Monthiversary. A surrender may have Federal income tax consequences.
(See "Federal Income Tax Considerations"). Once the Contract is surrendered,
SELIC's obligations under the Contract will cease. (See "Termination").
The Contract Holder may also request partial withdrawals of Net Cash Value
from one or more Available Divisions and the Fixed Fund. The withdrawal must
be requested by the Contract Holder in writing on a form acceptable to SELIC.
Unless other specific instructions are received from the Contract Holder, the
withdrawal will be taken from each Available Division and the Fixed Fund in
proportion to the Contract Holder's then current Insurance Account Value in
each Available Division and the Fixed Fund. (See "The Fixed Fund").
Surrender and partial withdrawal proceeds will generally be paid to the
Contract Holder within seven days. (See "Additional Provisions of the
Contract -- Availability of Funds" and "The Fixed Fund").
The Contract Holder may withdraw any amount of at least $1,000 per withdrawal
and up to the Contract's maximum withdrawal amount. The maximum withdrawal
amount for the Contract is equal to the Insurance Account Value less the sum
of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with the unpaid accrued
Contract Loan interest on the Contract Loan amount; and
(3) Contract Loan interest on the Contract Loan amount until the next
Contract Anniversary.
Partial withdrawals may increase the Net Amount at Risk, resulting in higher
Cost of Insurance Charges under the Contract.
The Death Benefit and Face Amount may be adjusted at the time a partial
withdrawal is taken, based on the amount withdrawn, the Death Benefit Option
then in effect for the Contract, and the Insurance Account Value. If the
Face Amount is reduced, the reduction
-29-
<PAGE>
<PAGE>
in Face Amount for Death Benefit Option 1 or Death Benefit Option 3 will be
equal to the amount of the withdrawal. The Total Insurance Coverage
remaining after the partial withdrawal may not be less than the Minimum
Insurance Coverage. A partial withdrawal request that would reduce the
Total Insurance Coverage below this minimum will not be effected. If the
Face Amount reflects previous Face Amount increases at the time of a partial
withdrawal which causes a reduction in Face Amount, then partial withdrawals
will be applied first to reduce the Initial Face Amount, and then to each
Face Amount increase in order, starting with the first increase.
A partial withdrawal that decreases the Face Amount of the Contract will
result in a recalculation of the Target Premium, and generally will decrease
the Target Premium for future Contract Years.
A partial withdrawal may have Federal income tax consequences. (See "Federal
Income Tax Considerations").
Split Dollar Exception: Notwithstanding the above limitations, SELIC will,
as a matter of administrative practice, at the time of a split dollar
rollout, allow the owner of a Death Benefit Option 3 Contract, the option of
reducing the accumulated Premiums before reducing the Face Amount. If the
withdrawal is greater than the accumulated Premiums, a reduction in Face
Amount will occur for the amount in excess of the accumulated Premiums.
This exception applies to policies issued pursuant to an employer-sponsored
benefit plan, with premiums paid at least in part by the employer.
DEATH BENEFITS UNDER THE CONTRACT
If the Insured dies while the Contract is in force, a Death Benefit is
payable to the Beneficiary when SELIC receives due proof of death and any
other requirements are satisfied. The amount of the Death Benefit payable
depends on the Death Benefit Option selected for the Contract by the Contract
Holder and in effect on the date of death of the Insured, and is adjusted for
outstanding Contract Loans and unpaid charges. (See "Payment of Death
Benefits"). The amount of the Death Benefit will be determined at the end of
the Valuation Period during which the Insured's death occurred. The Death
Benefit will be paid to the surviving Beneficiary or Beneficiaries specified
in the Application or as subsequently changed. The Death Benefit under each
Death Benefit Option will never be less than the Contract's Face Amount as
long as the Contract remains in force. For modifications to this Section for
Joint Insureds, see Appendix B -- "Joint and Last Survivor Rider."
DEATH BENEFIT OPTIONS: The Contract Holder may select one of the following
Death Benefit Options:
Option 1: The Face Amount in effect at the date of death;
Option 2: The Face Amount plus the Insurance Account Value in effect at
the date of death; or
-30-
<PAGE>
<PAGE>
Option 3: The Face Amount in effect at the date of death, plus the
accumulated Premiums paid under the Contract up to the date of
death. In calculating the Death Benefit under this option, the
Premiums are accumulated from the date such Premiums were
credited to the Insurance Account Value to the date of death,
at a rate equal to the Death Benefit Option Accumulation Rate
shown in the Contract. This rate, which is selected by the
Contract Holder and subject to approval by SELIC, may be as low
as 0%, and does not have a maximum cap. A higher Death Benefit
Option Accumulation Rate will result in higher Cost of
Insurance Charges under a Contract.
To ensure that the Contract will qualify as life insurance under the Internal
Revenue Code, the Total Insurance Coverage will never be less than the
Minimum Death Benefit. The Minimum Death Benefit is equal to the Insurance
Account Value on the date of death multiplied by the appropriate Minimum
Death Benefit Factor as set forth in the Contract. Currently SELIC
calculates the Minimum Death Benefit Factor in accordance with Section
7702(a)(1) of the Internal Revenue Code ("The Cash Value Accumulation Test").
In the future SELIC may offer Contracts that will use Minimum Death Benefit
Factors and Premium limitations calculated in accordance with Section
7702(a)(2) of the Internal Revenue Code ("The Guideline Premium Test"). Once
a Contract is issued complying with either "The Cash Value Accumulation Test"
or "The Guideline Premium Test" that test and the Minimum Death Benefit
Factors will be employed throughout the life of the Contract.
-31-
<PAGE>
<PAGE>
A table of representative Minimum Death Benefit Factors follows:
<TABLE>
==========================================================
MINIMUM DEATH BENEFIT FACTORS
- ----------------------------------------------------------
<CAPTION>
UNISEX
AGE UNISMOKE
==========================================================
<S> <C>
25 5.79
- ----------------------------------------------------------
30 4.93
- ----------------------------------------------------------
35 4.18
- ----------------------------------------------------------
40 3.55
- ----------------------------------------------------------
45 3.03
- ----------------------------------------------------------
50 2.60
- ----------------------------------------------------------
55 2.25
- ----------------------------------------------------------
60 1.97
- ----------------------------------------------------------
65 1.74
- ----------------------------------------------------------
70 1.56
==========================================================
</TABLE>
Under Death Benefit Option 1 and Death Benefit Option 3, positive investment
performance (if any) will be reflected in Insurance Account Value, but not in
the Death Benefit, unless the Death Benefit equals the Minimum Death Benefit.
Under Death Benefit Option 2, the amount of Death Benefit will always vary as
the Insurance Account Value varies, but will never be less than the Face
Amount. In general, if Death Benefit Option 2 is selected, positive
investment performance (if any) will be reflected in the Death Benefit.
Subject to certain limitations, the Contract Holder may change the Death
Benefit Option for the Contract while the Contract is in effect by notifying
SELIC in writing. If SELIC approves the change, it will take effect on the
next Contract Anniversary that is at least 30 days after all the required
information has been provided to SELIC. The Cost of Insurance Charges for
the Contract will be adjusted to provide for the change. No such change will
be effective if the Insured dies before the effective date of the change.
Changing the Contract's Death Benefit Option may result in either an increase
or decrease in the Face Amount. If the Face Amount increases, SELIC may
require satisfactory evidence of insurability. If the Face Amount decreases,
the order in which the Face Amount is reduced is assessed in the same manner
as a decrease in Face Amount. (See "Face Amount"). Any change in the Death
Benefit Option will not be effected if it would result in Total Insurance
Coverage that is less than the Minimum Insurance Coverage of the Contract.
SELIC also reserves the right not to effect a requested change in Face Amount
if the change would result in the Contract not satisfying the requirements
of the Internal Revenue Code of 1986, as amended.
-32-
<PAGE>
<PAGE>
A change in the Death Benefit Option will not result in an immediate change
in the amount of a Contract's Death Benefit or Insurance Account Value. If a
Contract is changed from Death Benefit Option 1 to Death Benefit Option 2,
then the Face Amount will equal the Face Amount prior to the change less the
Insurance Account Value on the effective date of the change. If a Contract
is changed from Death Benefit Option 3 to Death Benefit Option 2, then the
Face Amount will equal the Face Amount prior to the change plus the
accumulated Premiums less the Insurance Account Value on the effective date
of the change. If a Contract is changed from Option 2 or Option 3 to Option
1, then the Face Amount will equal the Death Benefit on the effective date of
the change. SELIC may require satisfactory evidence of insurability if the
Contract is changed from Option 2 or Option 3 to Option 1. If a Contract is
changed from Option 1 to Option 3, then the Face Amount will equal the Face
Amount prior to the change less the accumulated Premiums on the effective
date of change. If a Contract is changed from Option 2 to Option 3, then the
Face Amount will equal the Death Benefit less the accumulated Premiums on the
effective date of the change.
A change in Death Benefit Option may affect monthly Cost of Insurance
Charges, because the amount of this charge varies with a Contract's Net
Amount at Risk. Assuming the Death Benefit is not equal to the Minimum Death
Benefit, changing from Option 2 or Option 3 to Option 1 will generally
decrease Net Amount at Risk, and therefore decrease Cost of Insurance
Charges, on Monthiversaries following the effective date of the change.
Changing from Option 1 or Option 3 to Option 2 will generally result in a Net
Amount at Risk that remains level; however, under Option 2, Cost of Insurance
Charges will increase over time, because cost of insurance rates generally
increase with the age of the Insured. Finally a change from Option 1 or
Option 2 to Option 3 will result in a Net Amount at Risk that will vary based
upon the frequency and amount of Premium payments, as well as the rate at
which the Premiums are accumulated. Under Option 3, more frequent and higher
premium payments as well as a higher Death Benefit Option Accumulation Rate
generally will result in a higher Net Amount at Risk, and therefore higher
Cost of Insurance Charges.
FACE AMOUNT: The Minimum Face Amount under a Contract is $10,000. The
minimum Total Insurance Coverage is $25,000. The Initial Face Amount and
Supplemental Term Insurance Amount will be set forth in the Application. The
Contract Holder may, subject to approval of SELIC, change the Face Amount.
The Contract Holder must request the change by notifying SELIC in writing,
and SELIC reserves the right to require satisfactory evidence of
insurability, which may include a medical examination. If SELIC approves the
change, it will take effect on the next Contract Anniversary which is at least
30 days after all the required information has been provided to SELIC. A
partial withdrawal may also reduce the Face Amount under a Contract. (See
"The Contract -- Surrender and Partial Withdrawals"). Decreases in Face
Amount cannot reduce the Total Insurance Coverage to less than the Minimum
Insurance Coverage. No such change will be effective if the Insured dies
before the date of such change. SELIC reserves the right not to effect a
requested change in Face Amount if the change would result in the Contract not
satisfying the requirements of the Internal Revenue Code of 1986, as
-33-
<PAGE>
<PAGE>
amended. The Net Cash Value immediately following the increase in Face
Amount must be sufficient to cover Monthly Charges to be deducted on
the next Monthiversary. If Net Cash Value will not be sufficient, an
additional Premium will be necessary before the increase in Face Amount
will be effected.
If the Face Amount is decreased, and the Contract's Face Amount before the
change in Death Benefit Option reflects previous Face Amount increases, then
the Face Amount reduction will result first in the reduction of the Face
Amount provided by the most recent increase, then the next most recent
increase successively, and finally the Initial Face Amount.
A decrease in the Face Amount of the Contract will also result in a
recalculation of the Target Premium, and generally will decrease the Target
Premium for future Contract Years.
Additional insurance coverage may be available under one or more riders to
the Contract, including a Supplemental Term Insurance Rider. (See Appendix B
- -- "Supplemental Term Insurance Rider"). Under certain circumstances, SELIC
may offer Contracts through which insurance coverage is provided primarily
through the Supplemental Term Insurance Rider. Because insurance coverage
under such riders may be purchased through deductions from Available
Divisions and/or the Fixed Fund that are not taken into account in
determining Target Premium, there may not be additional Premium Load
associated with this coverage. There may be circumstances in which it will
be to the Contract Holder's economic advantage to include a significant
portion or percentage of coverage under the Supplemental Term Insurance
Rider. These circumstances depend on many factors, including the Premium
levels and amount and duration of coverage, as well as the age (and, where
applicable, sex, smoker status, and/or risk classification) of the Insured.
As discussed above, SELIC reserves the right to refund promptly certain
Premium amounts paid during the first Contract Year in excess of Planned
Renewal Premium amounts. (See "The Contract -- Premiums"). In such cases,
SELIC will generally agree to accept such Premium amounts provided that the
Contract Holder elects to convert a portion of the Face Amount, as determined
by SELIC, to coverage under a Supplemental Term Insurance Rider. Contract
Holders should contact their agent for additional information.
A change in Face Amount may have Federal income tax consequences. (See
"Federal Income Tax Considerations").
PAYMENT OF DEATH BENEFIT: The amount of any Death Benefit payable is
adjusted as follows:
(1) By deducting the amount of any unpaid Monthly Charges against the
Insurance Account Value to the date of death (See "Charges and
Deductions");
-34-
<PAGE>
<PAGE>
(2) By deducting the amount of any Contract Loans outstanding against the
Insurance Account Value on the date of death plus accrued but unpaid
interest on such Contract Loans on the date of death (See "The Contract
-- Contract Loan Privilege"); and
(3) By deducting the amount of any unpaid charges provided by rider.
The Death Benefit will usually be paid in a lump sum within seven days of the
date due proof of the Insured's death is received by SELIC at its Home Office
and any other requirements are satisfied. Payment of any amount of Death
Benefit based upon the Separate Account may be delayed, however, during any
period that:
(1) The New York Stock Exchange (or its successor) is closed, except for
normal weekend or holiday closings, or trading is restricted; or
(2) The SEC determines that a state of emergency exists.
Settlement of any amounts not based upon the Separate Account will be made
not more than six months after due proof of death is received. Interest on
Death Benefits will be credited as prescribed by law. Payment of a Death
Benefit may be deferred by a separate written agreement between SELIC and the
Contract Holder or Beneficiary, subject to SELIC's approval. In such cases,
the interest that will be credited will be at least 1.00% per annum.
BENEFICIARY: The Contract Holder may name or change the Beneficiary by
sending written notice to SELIC. A Beneficiary may be revocable or
irrevocable. An irrevocable Beneficiary may not be changed without his or
her consent, and consent is also required prior to the Contract Holder's
exercise of certain other rights. There may be different classes of
Beneficiaries, such as primary and secondary. These classes set the order of
payments. There may be more than one Beneficiary in a class. The
Beneficiary designation in effect on the Issue Date is stated in the Contract
Application and in any related documents which are attached to and made a
part of the Contract.
CHARGES AND DEDUCTIONS
Certain charges will be deducted by SELIC from Premiums and from Insurance
Account Value as compensation for providing the insurance benefits under the
Contract, for administering the Contract, for assuming certain risks, and for
incurring certain expenses in distributing the Contract. A prospective
purchaser may request personalized hypothetical illustrations of the
Contract's Insurance Account Value and Death Benefits. Such hypothetical
illustrations will reflect the effect of the charges and deductions under the
Contract and may assist a prospective purchaser in understanding the
operation of the Contract.
-35-
<PAGE>
<PAGE>
PREMIUM LOAD
Before crediting a Premium to the Available Divisions and/or the Fixed Fund,
a Premium Load, consisting of a Distribution Charge, a Federal Tax charge
and a Premium Tax Charge, is deducted from that Premium. Premium Load is
expressed as a percentage of Premium; the percentage depends upon whether
the Premium is Target Premium or Excess Premium, on the Contract Year during
which the Premium is paid, and on the Issue Age of the Insured.
DISTRIBUTION CHARGE: The Distribution Charge, which is a sales load, is
comprised of a Premium Expense Load and a Commission Charge.
The Premium Expense Load will be deducted from each Premium and will equal a
percentage of the Premium. The percentage will be determined based on the
sum of the Initial Premiums for all Contracts in a Case, in accordance with
the following table:
<TABLE>
<CAPTION>
SUM OF THE INITIAL PREMIUMS
OF ALL CONTRACTS IN THE CASE PREMIUM EXPENSE LOAD
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000 - $999,999 1.50%
$1,000,000 and more 1.25%
</TABLE>
A Commission Charge will be deducted from Premiums paid in each Contract Year
up to the Target Premium amount. There is no Commission Charge on any Excess
Premium amount paid during a Contract Year. The Commission Charge on
Premiums paid in a Contract Year up to the Target Premium amount is based
upon the Issue Age of the Insured and the Contract Year as follows:
<TABLE>
COMMISSION CHARGES DURING CONTRACT YEAR
---------------------------------------
<CAPTION>
Commission Charge
----------------------------------------------------------
For Contract Year Contract Years Contract Years
Issue Ages 1 2-10 11-15
---------- - ---- -----
<S> <C> <C> <C>
20 - 51 28.00% 8.00% 6.00%
52 - 59 28.00% 6.33% 4.00%
60 - 67 28.00% 4.66% 4.00%
68 - 80 19.00% 4.00% 4.00%
81 - 85 13.00% 4.00% 4.00%
</TABLE>
For all Issue Ages the Commission Charge will be 2.00% for Year 16 and
thereafter.
For Single Premium Payments, the maximum Commission Charge will be 6.00% of
Premium paid. Single Premium Payments are the excess of the Premium received
in the
-36-
<PAGE>
<PAGE>
first Contract Year over Planned Renewal Premium. Failure to pay
Planned Renewal Premium will not automatically result in lapse of the
Contract.
The Distribution Charge is intended to compensate SELIC for its expenses in
the distribution of the Contracts, including sales commissions, printing
prospectuses, preparing sales literature and paying for other promotional
activities. To the extent that those expenses are not recovered from the
Distribution Charge, those expenses may be recovered from other sources,
including profit, if any, the mortality and expense risk charge and mortality
gains. In accordance with applicable SEC regulations, Distribution Charge
amounts will not exceed nine percent of the sum of the "guideline annual
premiums" that would be paid during the period equal to the lesser of 20
years or the anticipated life expectancy of the Insured based on the 1980
Commissioners Standard Ordinary Mortality Table, as defined in such
regulations.
For modifications to this section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider." For modifications to this section with the
addition of a Term Rider, see Appendix B -- Supplemental Term Rider
Insurance.
PREMIUM TAX CHARGE: SELIC also deducts from each Premium a Premium Tax
Charge approximately equal to the taxes that are based on such Premium
received under the Contract and that are imposed on SELIC by the state in
which the Contract Holder resides or by the state in which the Insured
resides. In general, for Cases with one Contract Holder and with less than
500 Contracts, this charge will be determined as to any Contract in
accordance with the law of the state in which the Contract Holder resides.
For Cases with a greater number of Insureds and one Contract Holder, the amount
of the charge as to any Contract will be determined in accordance with the
law of the state in which the Insured resides. State premium tax rates
currently range from .75% to 5.00%.
FEDERAL TAX CHARGE: SELIC also deducts from each Premium a charge for federal
income taxes, equal to 1.00%, which compensates SELIC for an increased
federal tax burden resulting from the receipt of Premiums under Section 848
of the Internal Revenue Code. This charge for federal income taxes is
reasonable in relation to SELIC's federal tax burden under Section 848
resulting from the receipt of Premiums under the Contracts.
DAILY CHARGES
MORTALITY AND EXPENSE RISK CHARGE: Each Division of the Separate Account is
assessed a Mortality and Expense Risk Charge, which will never exceed an
annual effective rate of 0.50% of the Contract's Separate Account Value
attributable to that Division. Currently, the amount of this charge is an
annual effective rate of 0.35% of the Separate Account Value, which is
equivalent to 0.000957233% of the Separate Account Value attributable to the
Division on a daily basis.
-37-
<PAGE>
<PAGE>
The charge, which is designed to compensate SELIC for the mortality and
expense risks it assumes under the Contract, is deducted on a daily basis
from the Separate Account's assets.
The mortality risk assumed by SELIC under the Contract is that Insureds may,
on average, live for shorter periods of time than estimated and therefore
that the Cost of Insurance Charges specified in the Contract will be
insufficient to meet actual claims. The expense risk assumed by SELIC under
the Contract is the risk that other expenses of issuing and administering the
Contract and operating the Separate Account will be greater than the charges
imposed under the Contract to cover such expenses. If the money collected
from the Mortality and Expense Risk Charge is not needed to cover these
risks, it will be SELIC's gain and will be used for any proper purpose.
Conversely, if the money collected is insufficient to cover these risks,
SELIC will absorb any loss.
MONTHLY CHARGES
As of the Contract Date and on each Monthiversary thereafter, Monthly Charges
will be deducted from each Available Division and the Fixed Fund. Monthly
Charges consist of the Administration Charge, the Cost of Insurance Charge,
charges for additional benefits provided by Contract rider, and charges for
Special Insurance Class Rating, if any. These charges will be deducted from
each Available Division and the Fixed Fund in proportion to the Insurance
Account Value attributable to each Available Division and the Fixed Fund.
ADMINISTRATION CHARGE: On each Monthiversary, a charge is deducted to
compensate SELIC for administrative expenses. The current amount of this
charge is $4.50 per month per Contract. This charge may change, but is
guaranteed not to exceed $8.00 per month per Contract. The Administration
Charge is assessed to reimburse SELIC for the expenses associated with the
administration and maintenance of the Contract and the Separate Account.
SELIC does not expect to profit from this charge.
COST OF INSURANCE CHARGE: A deduction for SELIC's cost of insurance
protection is made on each Monthiversary and, unless otherwise specified by
the Contract Holder, will be based on unisex and unismoke rates. The cost of
insurance rates generally increase as the Insured's Attained Age increases.
SELIC also offers rates, upon a Contract Holder's request, that vary based on
the sex (except Contracts sold in Montana; See "Unisex Requirements Under
Montana Law") and smoker class of the Insured. However, any variation by sex
and/or smoker class must be applied on a consistent basis for all Contracts
in the applicable Case.
The Cost of Insurance Charge is determined by multiplying the applicable cost
of insurance rate by the Net Amount at Risk each Contract Month. Any change
in the Net Amount at Risk will affect the total Cost of Insurance Charges
deducted from the applicable Insurance Account Value. Since the Net Amount at
Risk may not be constant, the charge could vary monthly.
-38-
<PAGE>
<PAGE>
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract. Those
rates, as well as the rates used for Federal income tax purposes, are based
on the 1980 Commissioners Standard Ordinary (CSO) Mortality Tables, Age
Nearest Birthday that correspond to the applicable sex and smoker blend under
the Contract. Current Cost of Insurance Charges may be lower and may be
changed. The current Cost of Insurance Charges for the Contract Year are
shown in the Contract Holder's annual statement.
SELIC may offer insurance coverage up to $1 million on a guaranteed issue
(no medical underwriting required) or simplified issue (limited medical
underwriting) basis under Contracts that meet all the following
requirements:
1) The Case to which the Contract belongs has at least 25 Insureds;
2) Each Insured under the Contracts in the applicable Case must at the
time of issue be actively at work for a common Employer for a minimum
of 1,000 hours annually;
3) 100% of "eligible persons," defined in a manner acceptable to SELIC,
must be named as an Insured under the applicable Case;
4) The Face Amount, and any Supplemental Term Insurance Amount, for each
Contract in the applicable Case must be determined in all years by a
formula acceptable to SELIC;
5) The Face Amount increases, including any increases in Supplemental Term
Insurance Amount, in any given year for any Contract in the applicable
Case cannot exceed 10% and the cumulative increase in any Face Amount
cannot exceed the smaller of the initial Total Insurance Coverage or
$1,000,000;
6) The Contract Holder, Insured and Beneficiary of each Contract in the
applicable Case must be either an entity domiciled in the United States
or a United States citizen; and
7) The Insured under each Contract in the applicable Case must be between
the ages of 20 and 65.
For Simplified Issue Contracts, SELIC requires that certain medical
information regarding the prospective Insured be provided in the Application.
SELIC will also offer Contracts on a medically underwritten basis. In these
situations, the rating of an Insured will affect the cost of insurance rates.
SELIC will offer medically underwritten Contracts on a standard and
substandard rating basis. Standard rates will, in general, be less than
substandard rates.
-39-
<PAGE>
<PAGE>
For Contracts with applications dated prior to April 29, 1996 and issued on a
guaranteed issue or simplified issue basis the Cost of Insurance Charges will
vary only by the Attained Age of the Insured. For Contracts with applications
dated on or after April 29, 1996 and issued on a guaranteed issue basis the
Cost of Insurance Charges will vary only by the Attained Age of the Insured
but for Contracts issued on a simplified issue basis the Cost of Insurance
Charges will vary by the Issue Age and the number of completed Contract Years
under the Contract. For all Contracts issued on a medically underwritten
basis the Cost of Insurance Charges will vary by the Issue Age and the number
of Completed Contract Years under the Contract. In general cost of insurance
rates under Contracts that are issued on a guaranteed issue basis will be
greater than cost of insurance rates on Contracts issued on a Simplified
Issue basis, which will be greater than cost of insurance rates on Contracts
that are issued on a standard medically underwritten basis.
SELIC may require medical underwriting for any transaction that increases its
Net Amount at Risk. If any medical underwriting has taken place, an
Insured's rate class may affect the guaranteed and current cost of insurance
rate applicable to that Insured, but not the cost of insurance rate
applicable for Federal income tax purposes which for all Contracts will be
equal to 100% of the applicable 1980 CSO table.
Each Insured is placed in a rate class when SELIC issues a Contract, based on
the Case to which the Contract belongs and underwriting information,
including medical underwriting, if any. When an increase in Face Amount is
requested, SELIC reserves the right: (i) to accept or reject the request,
with or without obtaining additional underwriting information; and (ii) to
obtain additional underwriting information, including medical underwriting,
before approving the increase to determine whether a different rate class
would apply to the increase. If the Insured's rate class at the time of the
increase has declined since the last change in coverage, and SELIC approves
the change in coverage, then the lower rate class will be applied to the Face
Amount increase only. If the Insured's rate class at the time of the
increase has improved since the last change in coverage, then the improved
rate class will be applied to the Total Insurance Coverage provided under the
Policy.
ADDITIONAL INSURANCE BENEFITS AND SPECIAL INSURANCE CLASS RATINGS: Subject
to certain requirements, one or more riders may be added to a Contract.
These riders and the charges associated therewith are described in Appendix B
to this Prospectus. (See "Additional Provisions of the Contract -- Entire
Contract"). Deductions will be made on each Monthiversary for applicable
charges for any additional benefits provided by Contract rider.
Deductions will also be made on each Monthiversary for any applicable Special
Insurance Class Rating Charges, which are imposed under the Contract if a
Contract is issued on a substandard basis. These charges are set forth in
the Contract.
-40-
<PAGE>
<PAGE>
UNDERWRITING CHARGES
An Underwriting Charge of up to $100 will be deducted from the Insurance
Account Value on the Issue Date if the Contract is issued on a medically
underwritten basis. Medically underwritten Contracts, for purposes of
deducting this charge, are all Contracts other than those issued on a
guaranteed issue or simplified issue basis (see "Charges and Deductions --
Monthly Charges -- Cost of Insurance Charges"). SELIC also reserves the
right to deduct an Underwriting Charge of up to $100 from the Contract's
Insurance Account Value on any Monthiversary following a Contract Month in
which medical underwriting has taken place due to an increase in SELIC's Net
Amount at Risk with respect to the Contract. The Underwriting Charge is
assessed to reimburse SELIC for the expenses associated with the underwriting
of the Contract. SELIC does not expect to profit from this charge.
SELIC may, in its sole discretion, reduce or waive the Underwriting Charge in
connection with the purchase of Contracts sold by licensed agents of SELIC
that are also registered representatives of selected broker-dealers or
through banks that have entered into written sales agreements with Walnut
Street. Any reduction in or waiver of the Underwriting Charge is reflected
in the Contract.
The Underwriting Charge will be deducted from the Available Divisions and the
Fixed Fund in proportion to Insurance Account Value attributable to each
Division and the Fixed Fund.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
ANNUAL CHARGES
On each Contract Anniversary, the Insurance Account Value attributable to
the Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest
due and unpaid for the previous Contract Year; and (ii) increased by the
interest credited to the Borrowed Fund during the previous Contract Year.
The net result is that if Contract Loan interest is not paid when due, then
on the Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
-41-
<PAGE>
<PAGE>
OTHER CHARGES
TAXES AND OTHER GOVERNMENTAL CHARGES: SELIC does not currently make any
charges against the Divisions of the Separate Account for Federal, state or
local taxes attributable to them. However, SELIC may in the future impose
such a charge to provide for any tax liability of the Separate Account.
FEES AND EXPENSES OF UNDERLYING PORTFOLIOS: The value of an Accumulation
Unit of each Separate Account Division that invests in shares or interests of
an Underlying Portfolio will reflect the expenses incurred by that Underlying
Portfolio. The Underlying Portfolio's expenses will include its investment
management fee and its operating expenses. The management fees and operating
expenses of each Underlying Portfolio are set forth in the accompanying
prospectus for such underlying Portfolio.
ILLUSTRATIVE REPORT FEE: At the Contract Holder's request, SELIC will
provide an illustrative report in addition to the reports it customarily
provides. Depending upon the type and complexity of the requested report,
SELIC may charge a reasonable fee not to exceed $50.00 per report. (See
"Records and Reports"). This fee must be paid by the Contract Holder
separately and will not be considered a Premium payment.
TERMINATION
The Contract terminates on the earliest to occur of the following:
(1) The end of the Grace Period following any Monthiversary in which the
Net Cash Value for the Contract is insufficient to pay the Monthly
Charges (See "Termination for Insufficient Net Cash Value," below);
(2) The surrender of the Contract by the Contract Holder;
(3) The Maturity Date of the Contract; or
(4) The fulfillment of all of SELIC's obligations under the Contract.
MATURITY DATE
No insurance coverage will be effective on or after the Maturity Date, which
is the Contract Anniversary on which the Insured reaches Attained Age 100.
If the Insured is living and the Contract is in force on the Maturity Date,
the Net Cash Value will be paid to the Contract Holder, the Contract will
terminate, and the liability of SELIC under the Contract will cease.
-42-
<PAGE>
<PAGE>
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
TERMINATION FOR INSUFFICIENT NET CASH VALUE
A Contract will not terminate automatically for failure to pay a subsequent
Premium. However, if the Net Cash Value is not sufficient to cover the
Monthly Charges due with respect to a Contract on any Monthiversary, then the
Grace Period begins. This Grace Period begins on the Monthiversary on which
the Monthly Charges are due. The Grace Period ends 61 days from that
Monthiversary or, if later, 61 days after the date SELIC mails a written
notice to the Contract Holder at the last known address shown on SELIC's
records. This notice will state the Premium amount needed to keep the
Contract in force. During the Grace Period, the insurance coverage under the
Contract will continue in effect.
To continue the Contract's insurance coverage in force, the Contract Holder
must make a Premium payment before the Grace Period ends at least equal to
three times the Monthly Charges due when the Grace Period began, plus Premium
Load.
The Contract will terminate without value (and therefore the insurance
coverage will cease) at the end of the Grace Period if such amounts are not
paid.
REINSTATEMENT OF A CONTRACT TERMINATED FOR INSUFFICIENT VALUE
A Contract that has terminated for insufficient Net Cash Value may be
reinstated within five years from the date of Contract termination. The
Contract Holder must request the reinstatement in a form acceptable to SELIC
and pay the reinstatement Premium, which must be at least equal to the
Monthly Charges due and unpaid at the time of lapse, plus three times the
Monthly Charges due at the time of reinstatement, plus any applicable Premium
Load. Medical evidence of insurability will be required for reinstatement,
and the Insured must be living on the date the reinstatement becomes
effective.
For Modification to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
THE FIXED FUND
Amounts invested in the Fixed Fund become part of the general assets of SELIC
held in SELIC's General Account. SELIC invests the assets of the General
Account in accordance with applicable state insurance laws. Because of
exemptive and exclusionary provisions, interests in the General Account have
not been registered under the Securities Act of 1933, and the General Account
has not been registered as an investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the
Securities and
-43-
<PAGE>
<PAGE>
Exchange Commission has not reviewed the disclosure in this Prospectus
relating to the General Account. The disclosure regarding the General
Account may, however, be subject to certain generally applicable provisions
of the Federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.
This Prospectus describes a flexible premium variable life insurance
contract. This Prospectus together with the accompanying prospectuses for the
Underlying Portfolios, is generally intended to serve as a disclosure
document only for the aspects of the Contract relating to the Separate
Account. For complete details regarding the Fixed Fund, see the Contract
itself.
GENERAL DESCRIPTION
The General Account consists of all assets owned by SELIC, other than those
in the Separate Account and other separate accounts. Subject to applicable
law, SELIC has sole discretion over the investment of the assets of the
General Account.
The allocation of amounts to the Fixed Fund does not entitle a Contract
Holder to share in the investment experience of the General Account. Instead,
SELIC guarantees that the Insurance Account Value in the Fixed Fund will
accrue interest at a rate of at least 4.00%, compounded annually, independent
of the actual investment experience of the General Account.
The Borrowed Fund is also part of the General Account. (See "The Contract --
Contract Loan Privilege").
ALLOCATION OF AMOUNTS TO THE FIXED FUND
At Contract issue, SELIC will determine the maximum percentage of the
non-borrowed Insurance Account Value that may be allocated, either initially
or by transfer, to the Fixed Fund. This maximum percentage is set forth in
the Contract (the "maximum allocation percentage"). The ability to allocate
Net Premiums or to transfer Insurance Account Value to the Fixed Fund may not
be made available or may be limited in accordance with the terms of the
Contract. SELIC may, from time to time, adjust the maximum allocation
percentage. Such adjustments may not be uniform to all Contracts. Subject
to this maximum, a Contract Holder may elect to allocate Net Premiums to the
Fixed Fund, the Separate Account, or both. Subject to this maximum, the
Contract Holder may also transfer the Insurance Account Value from the
Available Divisions of the Separate Account to the Fixed Fund.
-44-
<PAGE>
<PAGE>
FIXED FUND BENEFITS
If the Contract Holder allocates all Net Premiums only to the Fixed Fund and
makes no transfers, partial withdrawals, or Contract Loans, the entire
investment risk under the Contract will be borne by SELIC.
FIXED FUND INSURANCE ACCOUNT VALUE
Net Premiums allocated to the Fixed Fund are credited to the Insurance
Account Value. SELIC bears the full investment risk for these amounts and
guarantees that interest credited to each Contract Holder's Insurance Account
Value in the Fixed Fund will not be less than a rate of at least 4.00% per
year, compounded annually. SELIC may, in its sole discretion, credit a
higher rate of interest, although it is not obligated to credit interest
in excess of 4.00% per year, and might not do so. ANY INTEREST CREDITED
ON THE CONTRACT'S INSURANCE ACCOUNT VALUE IN THE FIXED FUND IN EXCESS OF
THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF SELIC. THE CONTRACT HOLDER ASSUMES THE RISK THAT INTEREST
CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4.00% PER YEAR. If
excess interest is credited, a different rate of interest may be applied to
the value in the Borrowed Fund. The value in the Fixed Fund will be
calculated on each Monthiversary of the Contract.
SELIC guarantees that, on each Valuation Date, the Insurance Account Value in
the Fixed Fund will be the amount of the Net Premiums allocated or Insurance
Account Value transferred to the Fixed Fund, plus interest at the rate of
4.00% per year, plus any excess interest which SELIC credits and any amounts
transferred into the Fixed Fund, less the sum of all Contract charges
allocable to the Fixed Fund and any amounts deducted from the Fixed Fund in
connection with partial withdrawals, surrender charges or transfers to the
Separate Account.
On any given day the Insurance Account Value in the Fixed Fund will be equal
to the Insurance Account Value in the Fixed Fund on the prior Valuation Day
plus:
(1) Any new Net Premium allocated to the Fixed Fund;
(2) Any amount transferred to the Fixed Fund from an Available Division or
the Borrowed Fund; and
(3) Any interest credited to the Fixed Fund;
and less:
(1) Any amount transferred from the Fixed Fund to an Available Division or
the Borrowed Fund;
-45-
<PAGE>
<PAGE>
(2) The Cost of Insurance Charges allocated to the Fixed Fund (deducted
only on a Monthiversary);
(3) The Administration Charges allocated to the Fixed Fund (deducted only
on a Monthiversary);
(4) Any partial withdrawals taken from such Contract and allocated to the
Fixed Fund;
(5) Any charges allocated to the Fixed Fund that are deducted from the
Insurance Account Value for benefits provided by Contract riders;
(6) Any Underwriting Charges allocated to the Fixed Fund;
(7) Any charges for Special Insurance Class Rating allocated to the Fixed
Fund (deducted only on a Monthiversary); and
(8) Any other charges allocated to the Fixed Fund as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
FIXED FUND TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS
Prior to the Maturity Date, amounts may be transferred from the Fixed Fund to
the Available Divisions or partially withdrawn from the Fixed Fund.
Transfers from the Fixed Fund are subject to the following restrictions:
(a) The transfer must be made in the 30-day period following a
Contract Anniversary; and
(b) The amount transferred in any Contract Year may be no larger
than 25% of the Insurance Account Value in the Fixed Fund on the
date of the transfer or withdrawal.
Contract Loans and partial withdrawals may also be made from the Contract's
Insurance Account Value in the Fixed Fund, subject to the conditions and
restrictions on Contract Loans and partial withdrawals described above. (See
"The Contract -- Contract Loan Privilege" and "The Contract -- Surrender and
Partial Withdrawals").
Transfers, surrenders, and partial withdrawals payable from the Fixed Fund
and the payment of Contract Loans allocated to the Fixed Fund may be delayed
for up to six months. However, if payment is deferred for 30 days or more,
SELIC will pay interest at
-46-
<PAGE>
<PAGE>
the rate of 2.50% per year for the period of the deferment. Amounts from
the Fixed Fund used to pay Premiums on Contracts with SELIC will not be
delayed.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Contracts and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon SELIC's understanding
of the present Federal income tax laws as they are currently interpreted by
the Internal Revenue Service ("Service"). No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of
the current interpretations by the Service.
1. TAX STATUS OF THE CONTRACT: Section 7702 of the Internal Revenue
Code of 1986, as amended (the "Code") sets forth a definition of a life
insurance contract for Federal tax purposes. The Section 7702
definition can be met if a life insurance contract satisfies either one
of two tests set forth in that section. The manner in which these tests
should be applied to certain features of the Contract is not directly
addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Contract features, the absence of final
regulations, and lack of other pertinent interpretations of Section
7702, thus creates some uncertainty about the application of Section
7702 to the Contract.
Nevertheless, SELIC believes that the Contract generally qualifies as a
life insurance contract for federal tax purposes. Because of the
absence of final regulations or any other pertinent interpretations, it,
however, is unclear whether a Contract with a joint and last survivor or
a term rider added will, in all cases, meet the statutory life insurance
contract definition. If a Contract were determined not to be a life
insurance contract for purposes of Section 7702, such contract would not
provide most of the tax advantages normally provided by a life insurance
contract.
If it is subsequently determined that a Contract does not satisfy
Section 7702, SELIC will take whatever steps it deems are appropriate
and reasonable to cause a Contract to comply with Section 7702. For
these reasons, SELIC reserves the right to modify the Contract as
necessary to attempt to qualify a Contract as a life insurance contract
under Section 7702.
Section 817(h) of the Code requires the investments of the Separate
Accounts to be "adequately diversified" in accordance with Treasury
Regulations for the Contract to qualify as a life insurance contract
under Section 7702 of the Code. Failure to comply with the
diversification requirements may result in not treating the Contract as
life insurance. If the Contract does not qualify as life insurance you
may be subject to immediate taxation on the incremental increases in
Insurance Account Value of the Contract. Regulations specifying the
diversification requirements have been issued by
-47-
<PAGE>
<PAGE>
the Department of Treasury, and SELIC believes it complies fully with
such requirements. In connection with the issuance of the diversification
regulations, the Treasury Department stated that it anticipates the
issuance of regulations or rulings prescribing the circumstances in which
an owner's control of the investments of a separate account may cause the
contract owner rather than the insurance company, to be treated as the
owner of the assets in the separate account. If a Contract Holder is
considered the owner of the assets of the Separate Account, income and
gains from the Account would be included in the Holder's gross income.
Though no Regulations on the subject of an owner's control of the
investments of a separate account have been issued since the Regulations
specifying the diversification requirements were issued, informal
guidance is available from certain private letter rulings issued by the
Internal Revenue Service to individual taxpayers. The ownership rights
under the Contract are different in certain respects from, those
described by the Internal Revenue Service in rulings in which it
determined the owners were not owners of separate account assets. For
example, a Contract Holder has additional flexibility in allocating
premium payments and cash values. These differences could result in the
Contract Holder being treated as the owner of a pro rata share of the
assets of the Separate Accounts. In addition, SELIC does not know what
standards will be set forth in any regulations or additional rulings
which the Treasury might issue. SELIC therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Contract
Holder from being considered the owner of a pro rata portion of the
assets of the Separate Accounts or to otherwise qualify the Contract for
favorable tax treatment.
The following discussion assumes that each Contract will qualify as a
life insurance contract for Federal income tax purposes.
2. TAX TREATMENT OF CONTRACT BENEFITS: SELIC believes the death
benefit under the Contract should generally be excludable from the gross
income of the Beneficiaries under Section 101(a)(1) of the Code.
Many changes or transactions involving a Contract may have tax
consequences, depending on the circumstances. Such changes include but
are not limited to the exchange of the Contract, a change in a
Contract's Face Amount, a change of ownership, the payment of a
subsequent premium, a partial withdrawal from a Contract, a complete
surrender of a Contract, an assignment, a Contract Loan, or a Contract
lapse with an outstanding Contract Loan. In addition, Federal estate
and state and local estate, inheritance, and other tax consequences of
ownership or receipt of Contract proceeds depend on the circumstance of
each Contract Holder or Beneficiary. A competent tax adviser should be
consulted for further information.
Generally, the Contract Holder will not be deemed to be in constructive
receipt of the Insurance Account Value including increments thereof,
under the Contract
-48-
<PAGE>
<PAGE>
until there is a distribution. The tax consequences of distributions
from, and loans taken from or secured by, the Contract(s) should
generally be determined on a Contract by Contract basis. (See "Multiple
Contracts," below).
Such tax consequences further depend on whether the Contract from which
the distribution is made or Contract Loan is taken is classified as a
"modified endowment contract" under Section 7702A. However, upon a
complete surrender or lapse of any Contract, if the amount received plus
the amount of Indebtedness exceeds the total investment in the Contract,
the excess will generally be treated as ordinary income subject to tax.
3. MODIFIED ENDOWMENT CONTRACTS: A Contract may be treated as a
modified endowment contract depending upon the amount of premiums paid
in relation to the death benefit provided in respect of such Contract.
The premium limitation rules for determining whether a Contract is a
modified endowment contract are complex. In general, a Contract will be
a modified endowment contract if the accumulated premiums paid at any
time during the first seven years after the Contract is established
exceeds the sum of the net level premiums which would have been paid on
or before such time if the future benefits provided in respect of the
Contract were deemed to be paid-up after the payment of seven level
annual premiums.
In addition, if the benefits or rights associated with a Contract are
"materially changed," it may cause such Contract to be treated as a
modified endowment contract. The material change rules for determining
whether a Contract is a modified endowment contract are also complex.
In general, however, the determination of whether a Contract will be a
modified endowment contract after a material change generally depends
upon the relationship among the death benefit associated with the
Contract at the time of such change, the Insurance Account Value at the
time of the change and the additional premiums paid in respect of the
Contract during the seven years starting with the date on which the
material change occurs. Moreover, a life insurance contract received in
exchange for a life insurance contract classified as a modified
endowment contract will also be treated as a modified endowment
contract.
(a) Distributions from Contracts Classified as Modified Endowment
Contracts: Contracts classified as modified endowment contracts
will be subject to the following tax rules: First, all
distributions, including distributions upon lapse or surrender,
from such a Contract are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Insurance
Account Value of the Contract immediately before the distribution
over the investment in the Contract (described below) at such
time. Second, loans taken from or secured by, the Insurance
Account Value of such a Contract, as well as due but unpaid
interest thereon, are treated as distributions from such Contract
and taxed accordingly. Third, a
-49-
<PAGE>
<PAGE>
10 percent additional income tax is imposed on the portion of
any distribution from, or loan taken from or secured by, such a
Contract that is included in income except where the
distribution or loan is made on or after the taxpayer attains
age 59 1/2, is attributable to the taxpayer's becoming disabled,
or is part of a series of substantially equal periodic payments
for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of the taxpayer and the
taxpayer's Beneficiary. Contract Holders that are not natural
persons are unlikely to meet these exceptions.
If a Contract becomes a modified endowment Contract after it is
issued, distributions made during the Contract year in which it
becomes a modified endowment Contract, distributions in any
subsequent Contract year and distributions within two years before
the Contract becomes a modified endowment Contract will be subject
to the tax treatment described above. This means that a
distribution from a Contract that is not a modified endowment
Contract could later become taxable as a distribution from a
modified endowment Contract.
(b) Distributions From Contracts Not Classified as Modified Endowment
Contracts: Distributions from a Contract that is not a modified
endowment contract are generally treated as first recovering the
investment in the Contract (described below) and then, only after
the return of all such investment in the Contract, as distributing
taxable income. An exception to this general rule may occur in the
case of a decrease in the death benefit provided in respect of a
Contract (possibly resulting from a partial withdrawal) or any
other change that reduces benefits associated with the Contract in
the first 15 years after the Contract is established and that
results in a cash distribution to the Contract Holder in order for
the Contract to continue complying with the Section 7702
definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in
the Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a modified
endowment contract are generally not treated as distributions.
Instead, such loans are generally treated as indebtedness of the
Contract Holder. However, if the Service or a court were to deem
the loan not 'bona fide', it is possible that the loans from the
Contract may be treated as taxable distributions.
Neither distributions (including distributions upon surrender or
lapse) nor loans from, or secured by, a Contract that is not a
modified endowment contract are subject to the 10% additional
income tax. If a Contract which is not a modified endowment
contract subsequently becomes a modified endowment contract, then
any distribution made from the Contract within
-50-
<PAGE>
<PAGE>
two years prior to the date of such change in status may become
taxable and subject to the 10% additional income tax.
(c) Classification of Contract: Due to the Contract's flexibility,
classification of a Contract as a modified endowment contract will
depend upon the circumstances of each Contract. SELIC has adopted
administrative steps designed to protect a Contract Holder against
the possibility that a Contract might become a modified endowment
contract. SELIC believes the safeguards are adequate for most
situations, but it cannot provide complete assurance that a
Contract will not be classified as a modified endowment contract.
At the time a Net Premium is credited which (according to SELIC's
calculations) would cause a Contract to become a modified
endowment contract, SELIC will notify the Contract Holder that
unless a refund of the excess Premium is requested by the Contract
Holder, the Contract will be a modified endowment contract. The
Contract Holder will have 30 days after receiving such
notification to request the refund. If the Contract Holder requests
a refund, SELIC will refund the excess Premium paid, plus the
greater of (a) the investment gain on the excess premium, or (b)
interest on the excess Premium calculated at an annual rate of
4.00%. The amount to be refunded will be deducted from the
Insurance Account Value in the Available Divisions and in the
Fixed Fund in the same proportion as the payment was allocated.
A Contract Holder should contact a competent tax adviser before
purchasing a Contract to determine the circumstances under which a
Contract would be a modified endowment contract. In addition, a
Contract Holder should contact a competent tax adviser before paying any
additional premiums; making any other change to, including an exchange
of, a Contract; or making a change to the benefits provided under a
Contract to determine whether such premium or change would cause the
Contract (or the new contract in the case of an exchange) to be treated
as a modified endowment contract.
4. LOAN INTEREST: Generally, interest paid on any loan under a life
insurance contract which is owned by an individual is not deductible. In
addition, interest on any loan under a life insurance contract owned by
a business taxpayer on the life of any individual who is an officer of
or is financially interested in the business carried on by that taxpayer
is deductible only under certain very limited circumstances. A CONTRACT
HOLDER SHOULD CONSULT A COMPETENT TAX ADVISER BEFORE DEDUCTING ANY LOAN
INTEREST.
5. INVESTMENT IN A CONTRACT: Investment in a Contract means (i) the
aggregate amount of any premiums or other consideration paid in respect
of a Contract, minus (ii) the aggregate amount received under the
Contract which is excluded from gross income of the Contract Holder
(except that the amount of any loan from, or secured by, a Contract that
is a modified endowment contract, to the
-51-
<PAGE>
<PAGE>
extent such amount is excluded from gross income, will be disregarded),
plus (iii) the amount of any loan from or secured by a Contract that
is a modified endowment contract to the extent that such amount is
included in the gross income of the Contract Holder.
6. MULTIPLE CONTRACTS: All modified endowment contracts that are issued
by SELIC (or its affiliates) to the same Contract Holder during any
calendar year are treated as one modified endowment contract for
purposes of determining the amount includible in gross income under
section 72(e) of the Code. In view of this rule, in the event that a
number of Contracts are established at the same time or during the same
calendar year, it is important to determine how many, if any, of the
Contracts will be treated as modified endowment contracts. A competent
tax adviser should be consulted for further information.
7. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS: Under provisions
added to the Code in 1997 applicable to insurance policies issued after
June 8, 1997, if a business taxpayer owns or is the beneficiary of a
Contract on the life of any individual who is not an officer, director,
employee, or 20 percent owner of the business carried on by that
taxpayer and the taxpayer also has indebtedness unrelated to the
Contract, no tax deduction will be allowed for that portion of the
taxpayer's unrelated interest expense that is "allocable" to the Net
Cash Value (unborrowed Insurance Account Value) of the Contract. The
allocable portion of unrelated interest expense is based on the ratio of
the unborrowed cash surrender values of all life insurance and annuity
contracts issued to the taxpayer after June 8, 1997 to the adjusted
basis of all other assets of the taxpayer. A Contract issued before June
9, 1997 will become subject to this pro rata disallowance rule if there
is a material increase in the death benefit or other material change in
the terms of the Contract. No business taxpayer should purchase,
exchange, or increase the death benefit under a Contract on the life of
any individual who is not an officer, director, employee, or 20 percent
owner of the business without specifically considering the overall tax
effect that an interest in such a Contract would, or could, have.
8. ALTERNATIVE MINIMUM TAX: There may also be an indirect tax upon the
inside build-up of the Contract under the corporate alternative minimum
tax.
9. OTHER TAX CONSEQUENCES. The Contract may be used in various
arrangements, including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans,
tax exempt and nonexempt welfare benefit plans, retiree medical benefit
plans and others. The tax consequences of such plans may vary depending
on the facts and circumstances of each individual arrangement.
Therefore, if you are contemplating the use of the Contract in any
arrangement the value of which depends in part on its tax consequences,
you should be sure to consult a qualified tax advisor regarding the tax
attributes of the particular arrangement and the suitability of this
product for the arrangement.
-52-
<PAGE>
<PAGE>
10. POSSIBLE CHANGES IN TAXATION: As of the date of this Prospectus,
the President's budget for fiscal year 1999 includes proposals that
would (i) restrict even further the deductibility of policy loan
interest, so that no policy loan interest would be deductible except for
interest on loans under policies insuring 20 percent owners, (ii) expand
the unrelated interest expense pro rata disallowance rule enacted in
1997 so that the rule would apply to all policies owned by business
entities, except for policies on 20 percent owners, (iii) tax the inside
buildup of variable life insurance policies whenever policy values were
reallocated among investment options available under a policy, (iv) end
the tax free treatment under Code section 1035 of exchanges of variable
life insurance policies, and (v) decrease the policyholder's tax basis
in an insurance contract by the amount of mortality and expense charges
paid to the insurer over the life of the contract. Moreover, it is
possible that any changes in the tax treatment of life insurance
policies could be effective prior to the date of any new legislation.
11. POSSIBLE CHARGE FOR TAXES: SELIC is presently taxed as a life
insurance company and does not incur federal income tax liability, or
state or local tax liability, attributable to investment income or
capital gains of the Separate Account. Based on these assumptions, no
charge is currently being made to the Separate Account for federal
income taxes, or state or local taxes. However, SELIC may in the future
impose such a charge if (i) the tax treatment of SELIC is ultimately
determined to be other than what SELIC believes it to be, (ii) there are
changes made in the income tax treatment, or state or local tax
treatment, of variable life insurance at the company level, or of the
separate accounts, or (iii) there is a change in SELIC's status. Any
such charge would be designed to cover the taxes attributable to the
investment results of the Separate Accounts.
ADDITIONAL PROVISIONS OF THE CONTRACT
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
SELIC reserves the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held
by the Separate Account or that the Separate Account may purchase. SELIC
reserves the right to eliminate the shares of any of the Underlying
Portfolios and to substitute the shares of another registered open-end
investment company if the shares of an Underlying Portfolio are no longer
available for investment or if, in SELIC's judgment, further investment in
any Underlying Portfolio becomes inappropriate in view of the purposes of the
Separate Account. SELIC will not substitute any shares attributable to a
Contract Holder's interest in a Division of a Separate Account without notice
to the Contract Holder and prior approval of the SEC, to the extent required
by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of
-53-
<PAGE>
<PAGE>
contracts, or from permitting a conversion between series or classes of
contracts on the basis of requests made by Contract Holders.
The participation agreements pursuant to which Underlying Portfolios sell
shares to the Separate Account can be terminated by the Underlying Portfolio
or by SELIC under a variety of circumstances, with or without cause.
SELIC also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new investment company,
with a specified investment objective. New Divisions may be established
when, in the sole discretion of SELIC, marketing needs or investment
conditions warrant, and any new Division will be made available to existing
Contract Holders on a basis to be determined by SELIC. SELIC may also
eliminate or combine one or more Divisions, substitute one Division for
another Division, or transfer assets between Divisions, if, in its sole
discretion, marketing, tax, or investment conditions warrant; such changes
will not occur without notice to the Contract Holder and prior approval of
the SEC, to the extent required by the 1940 Act or other applicable law.
In the event of a substitution or change, SELIC may, if it considers it
necessary, make changes in the Contract by appropriate endorsement. SELIC
will notify Contract Holders of any such changes.
If deemed by SELIC to be in the best interests of persons having voting
rights under the Contracts, and to the extent any necessary SEC approvals or
Contract Holder votes are obtained, the Separate Account may be: (a) operated
as a management company under the 1940 Act; (b) de-registered under that Act
in the event such registration is no longer required; or (c) combined with
other separate accounts of SELIC. To the extent permitted by applicable law,
SELIC may also transfer the assets of the Separate Account associated with
the Contract to another separate account.
Also, subject to the approval of the New York Superintendent of Insurance,
SELIC has the right to change the investment policy of any Separate Account
Division. If required, the process for obtaining approval of a material
change from the New York Superintendent of Insurance will be filed with the
insurance supervisory official of the Governing Jurisdiction. SELIC will
notify the Contract Holder if any material change of investment policy is
approved.
INCONTESTABILITY
SELIC must bring any legal action to contest the validity of any insurance
coverage under the Contract within two years from the applicable Issue Date
of the Contract, or from the effective date of any change in coverage
requiring medical evidence of insurability, as applicable.
-54-
<PAGE>
<PAGE>
CONVERSION RIGHTS
Once the Contract is issued and as long as the Contract is in force, a
Contract Holder may during the first 24 months transfer all of the Insurance
Account Value into the Fixed Fund and receive fixed and guaranteed benefits
under the Contract. Once this right is exercised, no transfers out of the
Fixed Fund will be allowed and all Net Premiums paid after the election will
be allocated to the Fixed Fund. This request must be in writing and must
specifically indicate that the transfer is being made pursuant to the
Conversion Right. This transfer will not be subject to any transfer
limitations or charges. At the time of such transfer, there will not be any
effect on the Contract's Death Benefit, Contract Loans, Face Amount, Net
Amount at Risk, Issue Age or insurance class. All benefits after a
conversion will be based upon the Fixed Fund.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated in the Application and
the misstatement is discovered after the Insured's death, the amount of Death
Benefit payable by SELIC will be that which the most recent mortality charges
would have purchased for the correct age and sex. If the Insured is still
living at the time of discovery, future amounts payable will be adjusted
based upon the correct facts.
SUICIDE
Subject to the insurance laws of the Governing Jurisdiction, if the Insured
commits suicide, while sane or insane, within two years from the date
coverage becomes effective with respect to such person under the Contract,
only a limited Death Benefit will be payable. In such case, the amount of
the Death Benefit will be equal to the amount of the Net Premiums paid, less
any partial withdrawals, and less any Contract Loans and any Contract Loan
interest accrued but unpaid.
If, after the expiration of the two year period described above, the Insured
commits suicide within two years from the date of receipt of any subsequent
Premium that increases the amount of the Death Benefit, the amount of the
Death benefit attributable to such increase will be limited to a refund of
the Cost of Insurance Charges made for such increase.
AVAILABILITY OF FUNDS
Cash payments from the Contract for partial withdrawals, Contract Loans, and
surrenders will usually be made within seven days after a written request is
received at the Home Office of SELIC. Transfers between or among Separate
Account Divisions will usually be effected on the date the transfer request
is received in good order. Payment or transfers may be delayed, however,
during any period that:
(1) The New York Stock Exchange (or its successor) is closed for trading;
or
(2) The SEC determines that a state of emergency exists.
-55-
<PAGE>
<PAGE>
Payment of the portion of any amount payable from the Fixed Fund for Contract
Loans, partial withdrawals or surrender, and transfers to the Separate
Account Divisions may be delayed for not more than six months. If payment is
deferred for 30 days or more, SELIC will pay interest on such amounts at the
rate of 2.50% per year for the period of deferment.
ENTIRE CONTRACT
The Contract is issued in consideration of the Application and the Initial
Premium. The Contract and Application, a copy of which is attached to the
Contract, together with any Contract Schedules, any riders, and any other
related documents constitute the entire Contract. Any waiver or change of
any provision in the Contract must be in writing and signed by an officer of
SELIC. Additional insurance benefits may be made available under the
Contract by rider. Any such riders selected by the Contract Holder and
agreed to by SELIC will be attached to and made a part of the Contract.
The failure of SELIC to enforce any provision of the Contract does not
constitute and cannot be construed as a waiver of such provision or of the
right to enforce it at a later time, nor does the waiver of any provision by
SELIC on one or more occasions constitute nor can it be construed as a waiver
for all occasions, and SELIC cannot be stopped from enforcing any provision
of the Contract except as may be otherwise agreed to in writing by an officer
of SELIC.
REPRESENTATIONS IN APPLICATION
SELIC deems all statements in the Application to be representations and not
warranties. SELIC will not use any statement, in the absence of fraud, to
void the Contract or to defend a claim for the insurance benefits under the
Contract unless it is contained in the Application and a copy of the
Application is attached to the Contract on the Issue Date, or unless it is
contained in a related document and signed either by the Contract Holder or
by the proposed Insured, and a copy of such completed document is provided to
the Contract Holder on the Issue Date or on the effective date of any change
requiring evidence of insurability.
CONTRACT APPLICATION AND CONTRACT SCHEDULES
If any information contained in the Contract, Application, Contract
Schedules, or any other related documents for the Contract is inaccurate or
untrue on the date the Contract is issued, the Contract Holder is required
under the Contract to promptly notify SELIC and provide corrected
information.
-56-
<PAGE>
<PAGE>
RIGHT TO AMEND CONTRACT
If any provision in the Contract is in conflict with the laws of the
Governing Jurisdiction, the provision will be deemed to be amended to conform
with such laws. SELIC may amend the Contract from time to time as may be
required to meet the definition of "life insurance" under the Internal
Revenue Code of 1986, as amended, or its regulations or published rulings.
COMPUTATION OF CONTRACT VALUES
A detailed statement of the method used to compute the Contract's benefits
and values is filed with the insurance regulatory authority of the Governing
Jurisdiction. These benefits and values are not less than those required by
the laws of the Governing Jurisdiction.
CLAIMS OF CREDITORS
The proceeds of the Contract will be free from creditors' claims to the
extent allowed by law.
NOTICE
Any written notice required by the Contract to be given by SELIC to the
Contract Holder will be effective five days after it is mailed by first class
mail or 15 days after it is mailed by third class mail (or when received, if
sent by any other means) to the Contract Holder at the Contract Holder's
current address as noted on the records of SELIC.
Any written notice required by the Contract to be given by the Contract
Holder to SELIC will be effective when received in a form acceptable to SELIC
at its Home Office. To be acceptable, a notice must be in written form, in
the English language (except where applicable law requires otherwise), must
include all pertinent information, and must be signed by the Contract Holder
or an individual authorized to act for the Contract Holder and so designated
on the records of SELIC.
ASSIGNMENTS
Neither the Contract nor any of the rights of the Contract Holder or
Beneficiary under it may be assigned or transferred without the written
permission of SELIC.
CONSTRUCTION
In the event of a conflict between the Contract provisions and the
information contained in any Contract Schedule, the provisions of the
Contract will be controlling.
-57-
<PAGE>
<PAGE>
SEVERABILITY
In the event any provision of the Contract is declared illegal or otherwise
unenforceable, it will be severed from the Contract and the remainder of the
Contract will be valid and enforceable.
STATE VARIATIONS
Certain Contract features, including the "Free Look" provision, are subject
to state variations. The Contract Holder should read his or her Contract
carefully to determine whether any variations apply in the state in which the
Contract is issued.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The state of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the lives of its residents. Therefore, all Contracts
offered by this Prospectus and issued for delivery in Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account Divisions will be
maintained by SELIC. Each year within 30 days after the Contract
Anniversary, SELIC will mail a report to the Contract Holder. The report
will show the Insurance Account Value at the beginning of the previous
Contract Year and all Premiums paid since that time. It will also show the
additions to, and deductions from, the Insurance Account Value during the
Contract Year, and the Insurance Account Value, Death Benefit, Net Cash
Value, any outstanding Contract Loan amount and accrued Contract Loan
interest as of the current Contract Anniversary. The report will also
include any additional information required by applicable law or regulation.
SELIC also will mail the Contract Holder any other reports or documents
required by applicable law or regulation.
In addition to the periodic reports, the Contract Holder may request an
illustrative report showing projected Contract values. There may be a charge
for providing an illustrative report. (See "Charges and Deductions -- Other
Charges").
-58-
<PAGE>
<PAGE>
SALE OF THE CONTRACT
The Contract will be sold by individuals who, in addition to being licensed
as life insurance agents for SELIC, are also registered representatives of
Walnut Street Securities, Inc. ("Walnut Street"), the distributors of the
Contract, or of broker-dealers or through banks who have entered into written
sales agreements with Walnut Street. Walnut Street was incorporated under
the laws of Missouri in 1984 and is a subsidiary of GenAmerica Corporation.
Walnut Street is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. No director or officer of Walnut Street owns
any interest in the Separate Account, however, the policies issued through
the Separate Account may be used to fund nonqualified deferred obligations
of the depositor or its affiliates subject to any regulatory requirements.
However, the policies issued through the Separate Account may be used to
fund nonqualified deferred obligations of the depositor or its affiliates
subject to any regulatory requirements.
SELIC will pay the writing agent compensation equal to the Commission Charge
in connection with the Contract Holder's purchase of the Contract, plus a
maximum of 14.00% of any Excess Premiums paid in any Contract Year on
Contracts issued without any riders attached.
VOTING RIGHTS
To the extent required by law, SELIC will vote shares of the Underlying
Portfolios held in the Separate Account at regular or special shareholder
meetings of the Underlying Portfolios in accordance with instructions
received from persons having voting interests in the corresponding Divisions
of the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the Underlying Portfolios in its own right, it may elect to do so.
The number of votes that a Contract Holder has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Contract Holder at the record date rather than the number of
units alone. Fractional shares will be counted. The number of votes of an
Underlying Portfolio that the Contract Holder has the right to instruct will
be determined as of the date established by that Underlying Portfolio for
determining eligibility to vote at the meetings of the Underlying Portfolio.
The formula used to determine the number of votes of an Underlying Portfolio
that the Contract Holder has the right to instruct will be:
Total Value of Policy's Cash Value in the Underlying Portfolio
divided by
Total Value of the Underlying Portfolio
Multiplied by
Total number of Votes
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the Underlying Portfolio.
SELIC will vote shares as to which no timely instructions are received in
proportion to the voting instructions which are received with respect to the
contracts participating in
-59-
<PAGE>
<PAGE>
that Underlying Portfolio. SELIC will also vote shares it owns that are not
attributable to contracts in the same proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Underlying
Portfolio.
DISREGARD OF VOTING INSTRUCTIONS: SELIC may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification, or investment objective of an Underlying Portfolio, or
one or more of its Series, or to approve or disapprove an investment advisory
contract for an Underlying Portfolio. In addition, SELIC itself may
disregard voting instructions in favor of changes proposed by a Contract
Holder in the investment advisory agreement or the investment adviser of an
Underlying Portfolio if SELIC reasonably disapproves of such changes. A
proposed change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities, or SELIC determines
that the change would have an adverse effect on its General Account in that
the proposed investment advisory contract for an Underlying Portfolio may
result in overly speculative or unsound investments. In the event SELIC does
disregard voting instructions, a summary of that action and the reasons for
such action will be included in the next annual report to Contract Holders.
STATE REGULATION OF THE COMPANY
SELIC, a stock life insurance company organized under the laws of New York,
is subject to regulation by the New York Department of Insurance. An annual
statement is filed with the Superintendent of Insurance on or before March
1st of each year covering the operations and reporting on the financial
condition of SELIC as of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of the
Company and the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.
In addition, SELIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
-60-
<PAGE>
<PAGE>
<TABLE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS AND PRINCIPAL OFFICERS
<CAPTION>
NAME PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
<C> <S>
Willard N. Archie SELIC Director; Chief Executive Officer,
Chief Executive Officer Mitchell, Titus & Company (CPA management
Mitchell, Titus & Company, LLP consulting firm). Prior to January 1998, Vice
One Battery Park Plaza Chairman, Mitchell, Titus & Company. Prior to
New York, NY 10004-1461 January, 1996, Managing Partner, Mitchell, Titus
& Company.
Carson E. Beadle, SELIC Director; Consultant, Carson E. Beadle,
Consultant Inc. (consulting). Prior to April, 1998, Managing
Carson E. Beadle, Inc. Director, William M. Mercer Inc. (actuarial,
750 Park Avenue, Apt. 14E employee benefits, compensation and human
New York, NY 10021 resources management consulting firm).
James R. Elsesser SELIC Director; Vice President and Chief
Vice President & CFO Financial Officer, Ralston Purina Company (pet
Ralston Purina Company food, batteries, and bread business).
Checkerboard Square
St. Louis, MO 63164
Stanley Goldstein SELIC Director; Partner, Goldstein, Golub,
Goldstein, Golub, Kessler & Co. Kessler & Company (accounting services).
1185 Sixth Avenue
New York, NY 10036
David D. Holbrook SELIC Director; J&H, Marsh & McLennan. Prior
J&H, Marsh & McLennan, Inc. to May 1997, Chairman, Marsh & McLennan,
1166 Avenue of the Americas Inc. (insurance and reinsurance brokers,
New York, NY 10036 consulting and investment management).
Richard A. Liddy SELIC Director; Chairman of the Board;
Chairman, President and CEO President and Chief Executive Officer, General
General American Life Insurance Co. American Life Insurance Co. (life insurance).
700 Market Street
St. Louis, MO 63101
-61-
<PAGE>
<PAGE>
<S> <C>
Leonard M. Rubenstein, SELIC Director; Chairman, Chief Executive
Chairman, CEO and CIO Officer and Chief Investment Officer - Conning
Conning Asset Management Company Asset Management Company (investments). Prior
700 Market Street to January 1998, Executive Vice President -
St. Louis, MO 63101 Investments, General American Life Insurance
Co. (life insurance).
William C. Thater SELIC Director and President; Prior to June
President 1993, Vice President - Individual Life, General
Security Equity Life Insurance Co. American Life Insurance Co. (life insurance).
84 Business Park Drive, Suite #303
Armonk, NY 10504
H. Edwin Trusheim SELIC Director; Retired Chairman, General
General American Life Insurance Co. American Life Insurance Co. (life insurance).
700 Market Street
St. Louis, MO 63101
Virginia V. Weldon, M.D. SELIC Director; Prior to March 1998, Senior
242 Carlyle Lake Vice President, Monsanto Company (chemicals
St. Louis, MO 63141 diversified industry, pharmaceuticals, life science
products, and food ingredients business).
Ted C. Wetterau SELIC Director; Chairman and Chief Executive
Chairman and CEO Officer, Wetterau & Associates, Inc. (retail and
Wetterau Associates wholesale grocery, manufacturing business).
8112 Maryland Avenue, Suite 250
St. Louis, MO 63105
Ben H. Wolzenski, SELIC Director; Executive Vice President,
Executive Vice President - Individual General American Life Insurance Co. (life
General American Life Insurance Co. insurance).
13045 Tesson Ferry Road
St. Louis, MO 63128
A. Greig Woodring SELIC Director; CEO & President, Reinsurance
CEO & President Group of American, Inc. (reinsurance). Prior
Reinsurance Group of America, Inc. Executive Vice President - Reinsurance, General
660 Mason Ridge Center Dr., Suite 300 American Life Ins. Co.
St. Louis, MO 63141
</TABLE>
-62-
<PAGE>
<PAGE>
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities
laws has been provided by Christopher A. Martin, General Counsel, SELIC.
LEGAL PROCEEDINGS
Neither SELIC nor the Separate Account is involved in any material legal
proceedings.
EXPERTS
The audited financial statements of Security Equity Life Insurance
Company and the Separate Account have been included in the Prospectus in
reliance on the reports of KPMG LLP, independent certified public
accountants, and on the authority of said firm as experts in accounting
and auditing. The report of KPMG LLP covering the December 31, 1998,
financial statements of Security Equity Life Insurance Company refers to a
change in accounting for the capitalization of acquisition costs.
Actuarial matters included in this prospectus have been examined by
Ralph A. Gorter of Security Equity Life Insurance Company, whose opinion
is filed as an exhibit to the registration statement for the Contracts.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect
to the Contracts. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits
to the registration statement, to all of which reference is made for
further information concerning the Separate Account, SELIC and the
Contracts. Statements contained in this Prospectus as to the contents of
the Contract and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
Like all financial services providers, Security Equity utilizes systems
that may be affected by the Year 2000 transition issues, and it relies
on services providers, including the underlying funds, that may also be
affected. The company has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its
services providers are also so engaged. The resources that are being
devoted to this effort are substantial. It is difficult to predict with
precision whether the amount of resources ultimately devoted, or the
outcome of these efforts, will have any negative impact on the Company.
However, as of the date of this prospectus, we do not anticipate that
policy owners will experience negative effects on their investment, or
on the services provided in connection therewith, as a result of Year
2000 transition implementation. Security Equity currently anticipates
that its systems will be Year 2000 compliant, but there can be no
assurance that the company will be successful, or that interaction with
other service providers will not impair the company's services at that
time.
FINANCIAL STATEMENTS
The financial statements of SELIC which are included in this Prospectus
should be distinguished from the financial statements of the Separate
Account, and should be considered only as bearing on the ability of
SELIC to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held
in the Separate Account.
-63-
<PAGE>
<PAGE>
APPENDIX A -- UNDERLYING PORTFOLIOS
The Available Division invests in shares or units of an Underlying Portfolio
from the following open-end, management investment companies:
EVERGREEN VARIABLE TRUST
Evergreen VA Fund
Evergreen VA Foundation Fund
Evergreen VA Growth and Income Fund
FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY
Aggressive Equity Fund
Core Bond Fund
Multi-Style Equity Fund
Non-U.S. Fund
GENERAL AMERICAN CAPITAL COMPANY
Money Market Fund
VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III
Balanced Portfolio
JANUS ASPEN SERIES
Balanced Portfolio
Growth Portfolio
Worldwide Growth Portfolio
Each Underlying Portfolio operates as a separate investment vehicle, and the
income or losses of one Underlying Portfolio has no effect on the investment
performance of any other Underlying Portfolio.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH
UNDERLYING PORTFOLIO LISTED.
The prospectus for each Underlying Portfolio includes information regarding
the investment advisory fee and operating expenses of the Underlying
Portfolio, which are reflected in the value of the Accumulation Units of the
Division of the Separate Account that invests in such Underlying Portfolio.
The prospectus for each Underlying Portfolio also includes investment
strategies, objectives and investment advisor.
A-1
<PAGE>
<PAGE>
APPENDIX B -- CONTRACT RIDERS
JOINT AND LAST SURVIVOR RIDER
-----------------------------
The Joint and Last Survivor modifies the Contract to provide insurance
coverage on the lives of two Insureds. The rider will be subject to all
terms in the Contract, and the addition of the rider will not change any
mechanics of the Contract, except as modified in the Contract and highlighted
below. Some of the discussions in the Prospectus applicable to the Contract
apply differently to a Contract to which a Joint and Last Survivor Rider has
been added. Set out below are the modifications to designated sections of
the Prospectus in the event that a Joint and Last Survivor Rider is added to
the Contract. Except as noted below, the discussions in the Prospectus
referencing a single Insured can be read as though the single Insured was two
Insureds under a Contract with a Joint and Last Survivor Rider.
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Joint and Last Survivor
Rider:
FIRST INSURED: The first person of the two Insureds to die.
INSURED: A person whose life is insured under the terms of the Contract.
There are two Insureds under the Contract. Both Insureds are shown in the
Contract.
JOINT AND LAST SURVIVOR RIDER: A rider added attached to the Contract
described in this Prospectus, which will amend the Contract to pay a Death
Benefit after the death of Last Insured.
LAST INSURED: The last person of the two Insureds to die.
The following are the major differences between a Contract with a Joint and
Last Survivor rider added and one without.
1. All conditions of eligibility of a prospective Insured will be applied
to both Insureds in order for a Contract with a Joint and Last Survivor
Rider to be issued. (See "The Contract -- Availability of Insurance
Coverage").
B-1
<PAGE>
<PAGE>
2. Death Benefits will be paid on a Temporary Insurance Coverage basis
only if both Insureds meet SELIC's usual and customary underwriting
standards for the applied for coverage (See "The Contract --
Availability of Insurance Coverage").
3. All Contracts that are issued with a Joint and Last Survivor Rider
attached will require medical evidence of insurability. (See "The
Contract -- Evidence of Insurability").
4. All Contracts that are issued with a Joint and Last Survivor Rider
attached will pay a Death Benefit only on the death of the Last
Insured. No Death Benefit will be paid on the death of the First
Insured. (See "The Contract -- Death Benefits Under the Contract").
5. No change in Death Benefit Option or Face Amount will be effective if
the Last Insured dies before the change is effective. (See "The
Contract -- Death Benefit Options" on page 30 and "The Contract --
Death Benefits Under the Contract").
6. In general, a Contract with a Joint and Last Survivor Rider will have
a lower Target Premium than a Contract issued on a single Insured with
the same Total Insurance Coverage. This will result in lower
Commission Charges for a Contract with the same Total Insurance
Coverage. (See "Charges and Deductions -- Premium Load").
7. A deduction for SELIC's cost of insurance protection is made on each
Monthiversary and in general will be based upon the sex and smoker
status of the two Insureds. The Joint and Last Survivor cost of
insurance rates will be blended rates based upon the Issue Ages of the
Insureds, the number of completed Contract Years, as well as the sex
and smoker status of the Insureds. The cost of insurance rates may
also vary by any special insurance class charges.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract.
These rates, as well as the rates used to calculate the Minimum Death
Benefit and limitations on Premiums payable under the Contract, are
based on the 1980 Commissioners Standard Ordinary Tables, Age Nearest
Birthday, that correspond to the applicable ages, sex and smoker status
of the Insureds. Current cost of insurance rates may be lower.
B-2
<PAGE>
<PAGE>
Since a benefit is paid only in the event that both Insureds have died,
Cost of Insurance Charges for Contracts with a Joint and Last Survivor
Rider attached will generally be lower than the charges for a
comparable single life Contract. (See " Charges and Deductions -- Cost
of Insurance Charge").
8. The calculation of the Minimum Death Benefit and any limitations on
Premiums will reflect the fact that no Death Benefit will be paid until
the death of the Last Insured. Assuming the same amount of requested
Insurance Coverage, any limitations on Premiums payable under the
Contract will be lower than those based upon a single life, while the
Minimum Death Benefits will be higher than those based upon a single
life. (See "The Contract -- Death Benefits Under the Contract").
9. The Underwriting Charge for Contracts issued with a Joint and Last
Survivor Rider attached will be equal to the sum of a flat fee and a
charge per $1,000 of Total Insurance Coverage, subject to a maximum
charge. This charge is determined separately for each Insured. The
charges for each Insured are added together to obtain the total charge
for the Contact. This charge is deducted on each Monthiversary for the
first 12 Contract Months. The flat fee, charge per $1,000, and maximum
charge are shown in the table below.
<TABLE>
<CAPTION>
Per $1,000 of Total Maximum Total
Flat Fee Insurance Coverage Underwriting Charge
Issue Age Per Month Per Month Per Insured Per Month
<S> <C> <C> <C>
20 - 45 $4.17 $.00833 $37.50
46 - 60 $4.17 $.01250 $54.17
61 - 85 $4.17 $.01667 $54.17
</TABLE>
If there is a Contract change after issue which requires medical
underwriting, SELIC will deduct on the Monthiversary following the
underwriting an amount per Insured equal to $100, plus the per thousand
charge above multiplied by 12, multiplied by the increase in the Net
Amount at Risk to which the underwriting relates, subject to the
maximum charge shown above. (See "Charges and Deductions --
Underwriting Charges").
B-3
<PAGE>
<PAGE>
SELIC may, in its sole discretion, reduce or waive the Underwriting
Charge in connection with the purchase of Contracts sold by licensed
agents of SELIC that are also registered representatives of selected
broker-dealers or banks that have entered into written sales agreements
with Walnut Street Securities, Inc., the distributor of the Contracts.
Any reduction in or waiver of the Underwriting Charge will be reflected
in the Contract.
10. The Maturity Date of Contracts issued with a Joint and Last Survivor
Rider attached will be when the younger of the two Insureds reaches the
attained age of 100. (See "Termination -- Maturity Date").
11. For a Contract issued with a Joint and Last Survivor Rider attached to
be reinstated, both Insureds must be alive on the date of
reinstatement. (See "Termination -- Reinstatement of a Contract
Terminated for Insufficient Value").
12 Death Benefit will be paid on a Contract issued with a Joint and Last
Survivor Rider if either Insured commits suicide within two years from
the date coverage becomes effective or within two years from the date
of receipt of a Subsequent Premium payment which increases the Death
Benefit. (See "Additional Provisions of the Contract -- Suicide").
SUPPLEMENTAL TERM INSURANCE RIDER
---------------------------------
A Contract Holder may elect to add a Supplemental Term Insurance Rider to the
Contract at the time of the Application. The Supplemental Term Insurance
Rider increases the Total Insurance Amount under the Contract. The addition
of this Rider will allow SELIC to deduct additional monthly charges from the
Insurance Account Value of the Contract.
This rider may be added to a single life Contract, or a Contract to which a
Joint and Last Survivor Rider has been attached.
Set out below are additional definitions and other modifications applicable
when a Supplemental Term Rider is added to a Contract.
B-4
<PAGE>
<PAGE> 78
DEFINITIONS
- -----------
The following definitions apply to a Contract with a Supplemental Term
Insurance Rider:
DATE OF DEATH UPON WHICH DEATH BENEFIT BECOMES PAYABLE: The date of death of
the Insured, for a single life Contract, or the Last Insured for a Contract
to which a Joint and Last Survivor Rider has been added.
RIDER DEATH BENEFIT: Is the amount of Supplemental Term Insurance Coverage
under the Rider.
SUPPLEMENTAL TERM INSURANCE RIDER: A rider added to the Contract described
in this Prospectus, which will increase the Total Insurance Amount under the
Contract.
SUPPLEMENTAL TERM INSURANCE BENEFIT
The Supplemental Term Insurance Rider provides term insurance coverage (the
Rider Death Benefit) that is in addition to insurance coverage provided under
the Contract. SELIC will pay the Rider Death Benefit to the beneficiary if
the Date of Death Upon Which Death Benefit becomes Payable occurs while the
rider is in force. SELIC must receive proof that such death occurred before
the Rider Expiry Date in the Contract, or the termination of the coverage
provided by the Supplemental Term Insurance rider, if earlier, as specified
in the Rider and the Contract.
The Contract Holder may, subject to the approval of the Company, change the
Supplemental Term Insurance Amount. The Contract Holder must request any
change not specified in the Contract by notifying SELIC in writing. Evidence
of Insurability will be required for any change that increases the
Supplemental Term Insurance Amount. If SELIC approves the change, it will
take effect on the next Monthiversary which is at least 30 days after all the
required information has been provided to SELIC. The Contract will be
amended to reflect any such change in the Supplemental Term Insurance Amount.
No change will be effective if the Date Upon Which Death Benefit becomes
Payable is before the date of the change.
MONTHLY CHARGES FOR SUPPLEMENTAL TERM INSURANCE AMOUNTS - COST OF INSURANCE
CHARGES
Charges for the Supplemental Term Insurance Rider, which consist of monthly
Cost of Insurance Charges for the Rider Death Benefit, are
B-5
<PAGE>
<PAGE>
deducted from the Insurance Account Value on each Monthiversary. The
charges are determined by multiplying the rider Net Amount At Risk by the
current monthly Cost of Insurance Rate for the rider.
The rider Net Amount at Risk on any Monthiversary is equal to:
(a) The Supplemental Term Insurance Amount discounted to such
Monthiversary at the rate specified in the Basis of Computation
Specified in the Contract; less
(b) The excess, if any, of the Insurance Account Value on such
Monthiversary over the Death Benefit for the Contract discounted
to such Monthiversary at the rate specified in the Basis of
Computations Specified in the Contract.
The cost of insurance rates for the Supplemental Term Insurance Rider will be
equal to the current cost of insurance rates for the Face Amount under
Contract. On each Monthiversary on which the Supplemental Term Insurance Rider
is in force, the Cost of Insurance for the Supplemental Term Insurance Rider
will be added to the Monthly Charges deducted from the Insurance Account Value.
TERMINATION OF THE SUPPLEMENTAL TERM INSURANCE RIDER
The Supplemental Term Insurance Rider may be terminated as of any
Monthiversary following a written request to the Company. The Supplemental
Term Insurance Rider will terminate automatically when any of the following
events occur:
(a) The lapse of the Contract;
(b) The surrender of the Contract;
(c) The Maturity Date of the Contract;
(d) The Date of Death Upon Which Death Benefits become Payable; or
(e) The Rider Expiry Date.
REINSTATEMENT OF SUPPLEMENTAL TERM INSURANCE RIDER
B-6
<PAGE>
<PAGE>
If the Supplemental Term Insurance Rider terminates, it may be reinstated
within five years of the earlier of the Contact termination or rider
termination provided that:
(a) If the Contract has terminated, it is also being reinstated;
(b) Satisfactory evidence of insurability is provided to SELIC; and
(c) Any charges due under the rider are paid as of the date of the
Reinstatement.
The charges due will be equal to the amount of the charges for the rider due
and unpaid at the time that the rider terminated, plus three times the
charges for the rider due at the time of Reinstatement.
In order for the rider to be reinstated, the same number of Insureds under
the Contract must be alive as were alive when the rider terminated.
ADDITIONAL PROVISIONS OF THE RIDER - INCONTESTABILITY
In order for SELIC to contest the validity of any coverage provided by the
Supplemental Term Insurance Rider, legal action must be commenced within two
years from the rider effective date or from the effective date of any change
in rider coverage requiring evidence of insurability, including Reinstatement
of Coverage.
ADDITIONAL PROVISIONS OF THE RIDER - SUICIDE
If the Supplemental Term Insurance Rider is attached to a single life
Contract and the Insured dies by suicide, while sane or insane, within two
years from the rider Effective Date, the death benefit payable will be
limited to the sum of the Cost of Insurance Charges for the rider.
If this rider is attached to a Contract, to which a Joint and Last Survivor
Rider has been added, and either Insured dies by suicide, while sane or
insane, within two years from the rider Effective Date, the Death Benefit
payable will be limited to the sum of the Cost of Insurance Charges for the
rider.
The following are major modifications to a Contract when a Supplemental Term
Insurance Rider is added:
B-7
<PAGE>
<PAGE>
(1) Coverage provided by the Supplemental Term Insurance Rider is not taken
into account in determining the amount of Target Premium: accordingly
there may be no additional Premium Load associated with this coverage.
(See "The Contracts -- Premiums").
(2) In the event that a partial withdrawal results in a decrease in the
Face Amount, which would cause the Face Amount to be less than the
Minimum Face Amount of a Contract, the Supplemental Term Insurance
Amount will be decreased by the amount of the excess of the withdrawal
over the decreased Face Amount. (See "The Contract -- Surrender and
Partial Withdrawals").
(3) The Supplemental Term Insurance Amount will be included in Total
Insurance Coverage in determining whether the Minimum Death Benefit
applies, and is not included in Death Benefit proceeds when the Death
Benefit payable under the Contract is equal to the Minimum Death
Benefit.
B-8
<PAGE>
<PAGE>
APPENDIX C -- ILLUSTRATIONS OF DEATH BENEFITS
AND NET INSURANCE ACCOUNT VALUE
The following illustrations illustrate hypothetically how the Insurance
Account Value and Death Benefit of a Contract change with the investment
experience of the Available Division of the Separate Account. The
illustrations show how the Insurance Account Value and Death Benefit of a
Contract issued to an Insured of a given Issue Age and at a given Premium
would vary over time if the investment return on the assets held in each
Available Division of the Separate Account were an assumed uniform, gross,
after-tax annual rate of 0%, 6% or 12%. THE HYPOTHETICAL RATES OF RETURN ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT PERFORMANCE. The illustrations illustrate a Contract issued to a
Male, Issue Age 45 in a nonsmoker rate class assuming guaranteed issue. The
values would be different from those shown if the gross annual investment
rates of return averaged 0%, 6% or 12% over a period of years, but fluctuated
above and below those averages for individual Contract Years. The actual
values will depend upon various factors, including age, sex, smoking status,
and underwriting status of the Insured.
The Insurance Account Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the assumed rate of return,
reflecting deduction of the maximum mortality and expense risk charge, the
maximum monthly administrative charges, and monthly charges for the cost of
insurance based on the maximum values allowed under the 1980 Commissioners
Standard Ordinary Mortality Table. The Insurance Account Value column under
the "Current" heading shows the accumulated value of the Net Premiums at the
assumed rate of return, reflecting deduction of the current mortality and
expense risk charge, the current monthly administrative charges, and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between illustrations depending
upon whether Death Benefit Option 1, Option 2, or Option 3 is illustrated.
The amounts shown for the Insurance Account Value and Death Benefit reflect
the fact that the investment rate of return is lower than the gross after-tax
return on the assets held in a Division due to the advisory fee and operating
expenses of the Underlying Portfolio (which combined are assumed to be .72%
of aggregate average daily net assets). After deduction for these amounts and
the mortality and expense basis (.35% current, .50% guaranteed)
C-1
<PAGE>
<PAGE>
the illustrated gross annual investment rates of return of 0%, 6% and 12%
correspond to approximate net annual rates of -1.07%, 4.93%, and 10.93%,
respectively, on a current basis, and -1.22%, 4.78%, and 10.78%,
respectively, on a guaranteed basis. The average advisory fee and fund expense
reflects any voluntary expense reimbursement arrangements between the various
underlying funds and their investment advisors. The investment advisors could
terminate these arrangements at any time. If any of these arrangements are
terminated, the above net annual rates of return would be reduced. The actual
investment advisory fee applicable to each Division is shown in the respective
prospectuses for each Underlying Portfolio. These Prospectuses for the Funds
should also be consulted for details about the nature and extent of expenses
for each Underlying Portfolio.
The hypothetical values shown in the illustrations do not reflect any charges
for federal income taxes against the Separate Account, since Security Equity
Life Insurance Company is not currently making any such charges. However,
such charges may be made in the future and, in that event, the gross annual
investment rate of return of the Available Divisions would have to exceed 0%,
6% and 12% by an amount sufficient to cover the charges in order to produce
the Death Benefit and Insurance Account Value illustration. (See "Federal
Tax Matters").
The illustrations illustrate the Contract values that would result based upon
the investment rates of return if Premiums are paid as indicated, if all Net
Premiums are allocated evenly among Available Divisions, and if no Contract
Loans have been made. The illustrations are also based on the assumptions
that the Contract Holder has not requested an increase or decrease in the
Face Amount, that no partial withdrawals have been made, that no transfer
charges were incurred, and that no optional riders have been requested.
Upon request, Security Equity Life Insurance Company will provide a
comparable illustration based upon the proposed Insured's Issue Age, sex and
underwriting class, the Face Amount and Premium pattern requested, and any
available riders requested.
C-2
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 0%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(-1.07% Net) (-1.22% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,072 100,000 769 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 2,586 100,000 1,991 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 4,052 100,000 3,173 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 5,481 100,000 4,317 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 6,877 100,000 5,419 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 8,241 100,000 6,477 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 9,575 100,000 7,488 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 10,881 100,000 8,445 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 12,162 100,000 9,345 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 13,403 100,000 10,180 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 14,664 100,000 10,986 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 15,888 100,000 11,717 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 17,074 100,000 12,370 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 18,209 100,000 12,940 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 19,291 100,000 13,419 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 20,382 100,000 13,875 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 21,408 100,000 14,220 100,000
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 22,370 100,000 14,439 100,000
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 23,270 100,000 14,514 100,000
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 24,110 100,000 14,426 100,000
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 27,126 100,000 10,847 100,000
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 27,404 100,000 - -
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-3
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 6%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(4.93% Net) (4.78% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,140 100,000 828 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 2,819 100,000 2,186 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 4,548 100,000 3,585 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 6,341 100,000 5,027 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 8,204 100,000 6,510 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 10,144 100,000 8,037 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 12,165 100,000 9,603 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 14,272 100,000 11,207 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 16,477 100,000 12,845 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 18,767 100,000 14,516 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 21,208 100,000 16,256 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 23,753 100,000 18,025 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 26,405 100,000 19,824 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 29,160 100,000 21,651 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 32,022 100,000 23,502 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 35,070 100,000 25,457 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 38,236 100,000 27,432 100,000
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 41,533 100,000 29,423 100,000
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 44,973 100,000 31,419 100,000
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 48,570 100,000 33,415 100,000
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 69,157 109,268 43,222 100,000
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 93,847 134,201 51,941 100,000
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-4
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 12%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(10.93% Net) (10.78% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,209 100,000 887 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 3,061 100,000 2,389 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 5,082 100,000 4,029 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 7,302 100,000 5,823 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 9,748 100,000 7,784 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 12,446 100,000 9,930 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 15,428 100,000 12,279 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 18,725 100,000 14,849 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 22,380 100,000 17,662 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 26,416 100,000 20,742 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 30,943 100,000 24,162 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 35,957 100,000 27,918 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 41,514 100,000 32,052 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 47,672 100,112 36,610 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 54,476 111,130 41,646 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 62,039 123,457 47,308 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 70,355 135,786 53,585 103,418
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 79,498 149,456 60,439 113,626
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 89,552 163,879 67,887 124,234
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 100,602 180,077 75,958 135,965
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 174,437 275,610 127,534 201,504
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 291,431 416,746 202,603 289,723
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-5
<PAGE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ---------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 0%
Male Nonsmoker Age 45 --------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(-1.07% Net) (-1.22% Net)
- ---------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,071 101,071 766 100,766
- ---------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,583 102,583 1,979 101,979
- ---------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,043 104,043 3,149 103,149
- ---------------------------------------------------------------------------------------------
4 48 1,948 8,816 5,463 105,463 4,274 104,274
- ---------------------------------------------------------------------------------------------
5 49 1,948 11,302 6,846 106,846 5,350 105,350
- ---------------------------------------------------------------------------------------------
6 50 1,948 13,913 8,194 108,194 6,376 106,376
- ---------------------------------------------------------------------------------------------
7 51 1,948 16,654 9,507 109,507 7,346 107,346
- ---------------------------------------------------------------------------------------------
8 52 1,948 19,532 10,786 110,786 8,254 108,254
- ---------------------------------------------------------------------------------------------
9 53 1,948 22,554 12,037 112,037 9,094 109,094
- ---------------------------------------------------------------------------------------------
10 54 1,948 25,727 13,239 113,239 9,857 109,857
- ---------------------------------------------------------------------------------------------
11 55 1,948 29,059 14,457 114,457 10,578 110,578
- ---------------------------------------------------------------------------------------------
12 56 1,948 32,557 15,629 115,629 11,208 111,208
- ---------------------------------------------------------------------------------------------
13 57 1,948 36,230 16,754 116,754 11,745 111,745
- ---------------------------------------------------------------------------------------------
14 58 1,948 40,087 17,814 117,814 12,183 112,183
- ---------------------------------------------------------------------------------------------
15 59 1,948 44,137 18,806 118,806 12,510 112,510
- ---------------------------------------------------------------------------------------------
16 60 1,948 48,389 19,787 119,787 12,794 112,794
- ---------------------------------------------------------------------------------------------
17 61 1,948 52,854 20,681 120,681 12,943 112,943
- ---------------------------------------------------------------------------------------------
18 62 1,948 57,542 21,489 121,489 12,943 112,943
- ---------------------------------------------------------------------------------------------
19 63 1,948 62,464 22,211 122,211 12,772 112,772
- ---------------------------------------------------------------------------------------------
20 64 1,948 67,633 22,849 122,849 12,411 112,411
- ---------------------------------------------------------------------------------------------
25 69 1,948 97,621 24,374 124,374 7,169 107,169
- ---------------------------------------------------------------------------------------------
30 74 1,948 135,894 22,074 122,074 - -
- ---------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-6
<PAGE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ---------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 6%
Male Nonsmoker Age 45 --------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(4.93% Net) (4.78% Net)
- ---------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,140 101,140 824 100,824
- ---------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,815 102,815 2,174 102,174
- ---------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,538 104,538 3,557 103,557
- ---------------------------------------------------------------------------------------------
4 48 1,948 8,816 6,320 106,320 4,976 104,976
- ---------------------------------------------------------------------------------------------
5 49 1,948 11,302 8,167 108,167 6,426 106,426
- ---------------------------------------------------------------------------------------------
6 50 1,948 13,913 10,084 110,084 7,908 107,908
- ---------------------------------------------------------------------------------------------
7 51 1,948 16,654 12,074 112,074 9,415 109,415
- ---------------------------------------------------------------------------------------------
8 52 1,948 19,532 14,143 114,143 10,942 110,942
- ---------------------------------------------------------------------------------------------
9 53 1,948 22,554 16,297 116,297 12,483 112,483
- ---------------------------------------------------------------------------------------------
10 54 1,948 25,727 18,523 118,523 14,030 114,030
- ---------------------------------------------------------------------------------------------
11 55 1,948 29,059 20,887 120,887 15,617 115,617
- ---------------------------------------------------------------------------------------------
12 56 1,948 32,557 23,336 123,336 17,196 117,196
- ---------------------------------------------------------------------------------------------
13 57 1,948 36,230 25,868 125,868 18,762 118,762
- ---------------------------------------------------------------------------------------------
14 58 1,948 40,087 28,472 128,472 20,308 120,308
- ---------------------------------------------------------------------------------------------
15 59 1,948 44,137 31,145 131,145 21,819 121,819
- ---------------------------------------------------------------------------------------------
16 60 1,948 48,389 33,952 133,952 23,362 123,362
- ---------------------------------------------------------------------------------------------
17 61 1,948 52,854 36,818 136,818 24,846 124,846
- ---------------------------------------------------------------------------------------------
18 62 1,948 57,542 39,747 139,747 26,247 126,247
- ---------------------------------------------------------------------------------------------
19 63 1,948 62,464 42,741 142,741 27,540 127,540
- ---------------------------------------------------------------------------------------------
20 64 1,948 67,633 45,803 145,803 28,696 128,696
- ---------------------------------------------------------------------------------------------
25 69 1,948 97,621 61,795 161,795 31,461 131,461
- ---------------------------------------------------------------------------------------------
30 74 1,948 135,894 77,835 177,835 25,048 125,048
- ---------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-7
<PAGE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ----------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 12%
Male Nonsmoker Age 45 ---------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(10.93% Net) (10.78% Net)
- ----------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,208 101,208 883 100,883
- ----------------------------------------------------------------------------------------------
2 46 1,948 4,193 3,057 103,057 2,375 102,375
- ----------------------------------------------------------------------------------------------
3 47 1,948 6,448 5,070 105,070 3,998 103,998
- ----------------------------------------------------------------------------------------------
4 48 1,948 8,816 7,277 107,277 5,762 105,762
- ----------------------------------------------------------------------------------------------
5 49 1,948 11,302 9,702 109,702 7,680 107,680
- ----------------------------------------------------------------------------------------------
6 50 1,948 13,913 12,370 112,370 9,765 109,765
- ----------------------------------------------------------------------------------------------
7 51 1,948 16,654 15,309 115,309 12,029 112,029
- ----------------------------------------------------------------------------------------------
8 52 1,948 19,532 18,547 118,547 14,483 114,483
- ----------------------------------------------------------------------------------------------
9 53 1,948 22,554 22,124 122,124 17,141 117,141
- ----------------------------------------------------------------------------------------------
10 54 1,948 25,727 26,055 126,055 20,015 120,015
- ----------------------------------------------------------------------------------------------
11 55 1,948 29,059 30,447 130,447 23,165 123,165
- ----------------------------------------------------------------------------------------------
12 56 1,948 32,557 35,285 135,285 26,569 126,569
- ----------------------------------------------------------------------------------------------
13 57 1,948 36,230 40,614 140,614 30,249 130,249
- ----------------------------------------------------------------------------------------------
14 58 1,948 40,087 46,471 146,471 34,226 134,226
- ----------------------------------------------------------------------------------------------
15 59 1,948 44,137 52,907 152,907 38,521 138,521
- ----------------------------------------------------------------------------------------------
16 60 1,948 48,389 60,051 160,051 43,241 143,241
- ----------------------------------------------------------------------------------------------
17 61 1,948 52,854 67,894 167,894 48,331 148,331
- ----------------------------------------------------------------------------------------------
18 62 1,948 57,542 76,514 176,514 53,812 153,812
- ----------------------------------------------------------------------------------------------
19 63 1,948 62,464 85,994 185,994 59,704 159,704
- ----------------------------------------------------------------------------------------------
20 64 1,948 67,633 96,429 196,429 66,028 166,028
- ----------------------------------------------------------------------------------------------
25 69 1,948 97,621 166,496 266,496 105,134 205,134
- ----------------------------------------------------------------------------------------------
30 74 1,948 135,894 278,600 398,399 159,083 259,083
- ----------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-8
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 0%
Male Nonsmoker Age 45 ---------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(-1.07% Net) (-1.22% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,071 101,948 763 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,581 103,896 1,970 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,039 105,844 3,131 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 5,456 107,792 4,242 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 6,834 109,740 5,300 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 8,175 111,688 6,303 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 9,479 113,636 7,242 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 10,748 115,584 8,110 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 11,985 117,532 8,899 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 13,171 119,480 9,600 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 14,368 121,428 10,240 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 15,516 123,376 10,773 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 16,611 125,324 11,188 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 17,634 127,272 11,477 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 18,578 129,220 11,622 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 19,500 131,168 11,682 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 20,319 133,116 11,560 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 21,036 135,064 11,228 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 21,647 137,012 10,650 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 22,152 138,960 9,788 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 22,461 148,700 - -
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 17,034 158,440 - -
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-9
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 6%
Male Nonsmoker Age 45 ---------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(4.93% Net) (4.78% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,139 101,948 821 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,814 103,896 2,165 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,534 105,844 3,540 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 6,313 107,792 4,946 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 8,157 109,740 6,379 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 10,070 111,688 7,840 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 12,056 113,636 9,321 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 14,119 115,584 10,815 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 16,269 117,532 12,316 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 18,489 119,480 13,815 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 20,849 121,428 15,344 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 23,294 123,376 16,853 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 25,824 125,324 18,336 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 28,428 127,272 19,783 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 31,106 129,220 21,176 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 33,924 131,168 22,580 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 36,809 133,116 23,897 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 39,767 135,064 25,100 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 42,803 137,012 26,154 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 45,924 138,960 27,020 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 62,636 148,700 26,943 148,700
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 80,892 158,440 11,234 158,440
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-10
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 12%
Male Nonsmoker Age 45 ---------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(10.93% Net) (10.78% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,208 101,948 880 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 3,055 103,896 2,367 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 5,067 105,844 3,981 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 7,272 107,792 5,734 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 9,696 109,740 7,638 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 12,364 111,688 9,707 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 15,304 113,636 11,953 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 18,547 115,584 14,389 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 22,133 117,532 17,029 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 26,082 119,480 19,890 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 30,501 121,428 23,033 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 35,382 123,376 26,442 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 40,774 125,324 30,146 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 46,725 127,272 34,174 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 53,298 129,220 38,558 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 60,641 131,168 43,423 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 68,765 133,116 48,735 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 77,743 146,156 54,542 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 87,617 160,339 60,901 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 98,470 176,262 67,880 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 170,991 270,167 114,471 180,864
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 285,908 408,848 182,980 261,661
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-11
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Financial Statements and Schedule
December 31, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company
and Policyholders of Security Equity
Life Insurance Company Separate Account Thirteen:
We have audited the statement of net assets and liabilities, including
the schedule of investments, of the General American Capital Company
Money Market Fund, Wells Fargo Bank LAP Asset Allocation Fund, Wells
Fargo Bank LAP US Government Allocation Fund, Fidelity VIP Growth Fund,
Fidelity VIP II Investment Grade Bond Fund, Fidelity VIP II Asset
Manager Fund, Fidelity VIP II Index 500 Fund, Fidelity VIP Overseas
Fund, Fidelity VIP High Income Fund, Evergreen VA Fund, Evergreen VA
Foundation Fund, Evergreen VA Growth and Income Fund, Russell Multi-
Style Equity Fund, Russell Aggressive Equity Fund, Russell Non-US Fund,
and the Russell Core Bond Fund Divisions of Security Equity Life
Insurance Company Separate Account Thirteen as of December 31, 1998, and
the related statements of operations and changes in net assets for the
periods presented. These financial statements are the responsibility of
the management of Security Equity Life Insurance Company Separate
Account Thirteen. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
investments owned at December 31, 1998 by correspondence with underlying
Mutual Funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the General
American Capital Company Money Market Fund, Wells Fargo Bank LAP Asset
Allocation Fund, Wells Fargo Bank LAP US Government Allocation Fund,
Fidelity VIP Growth Fund, Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Asset Manager Fund, Fidelity VIP II Index 500 Fund,
Fidelity VIP Overseas Fund, Fidelity VIP High Income Fund, Evergreen VA
Fund, Evergreen VA Foundation Fund, Evergreen VA Growth and Income Fund,
Russell Multi-Style Equity Fund, Russell Aggressive Equity Fund, Russell
Non-US Fund, and the Russell Core Bond Fund Divisions of Security Equity
Life Insurance Company Separate Account Thirteen as of December 31,
1998, the results of their operations and the changes in their net
assets for the periods presented, in conformity with generally accepted
accounting principles.
St. Louis, Missouri
February 19, 1999
1
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Net Assets and Liabilities
December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets:
Investments at
market value $21,402,310 36,048 5,929,959 5,791,750 491,407
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 684 4 567 474 --
----------- ------ --------- --------- -------
Total net assets $21,401,626 36,044 5,929,392 5,791,276 491,407
=========== ====== ========= ========= =======
Total units $17,157,817 17,147 2,144,953 4,131,714 271,823
=========== ====== ========= ========= =======
Unit value $ 1.25 2.10 2.76 1.40 1.81
=========== ====== ========= ========= =======
Cost of investments $22,293,002 33,809 4,099,726 5,441,080 456,493
=========== ====== ========= ========= =======
<CAPTION>
Evergreen
Fidelity Evergreen VA
Index Evergreen VA Growth Fidelity
500 VA Foundation and Income Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets:
Investments at
market value 12,242,963 5,200,464 3,687,313 4,460,853 1,009,262
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 1,173 496 352 425 89
---------- --------- --------- --------- ---------
Total net assets 12,241,790 5,199,968 3,686,961 4,460,428 1,009,173
========== ========= ========= ========= =========
Total units 4,281,894 3,236,510 2,294,744 2,837,410 811,253
========== ========= ========= ========= =========
Unit value 2.86 1.61 1.61 1.57 1.24
========== ========= ========= ========= =========
Cost of investments 9,226,920 4,043,664 3,071,644 3,282,324 967,203
========== ========= ========= ========= =========
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at
market value 305,292 63 162,016 152,589 162,240 45,422
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 26 74 32 19 22 9
------- --- ------- ------- ------- ------
Total net assets 305,266 (11) 161,984 152,570 162,218 45,413
======= === ======= ======= ======= ======
Total units 274,990 -- 122,130 136,818 161,905 40,710
======= === ======= ======= ======= ======
Unit value 1.11 N/A 1.32 1.11 1.00 1.11
======= === ======= ======= ======= ======
Cost of investments 329,431 63 125,101 142,888 155,696 43,327
======= === ======= ======= ======= ======
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ -- 688 22,166 200,235 --
Expenses:
Mortality and expense
charge 22,095 97 18,814 15,984 --
---------- ----- --------- ------- ------
Net investment income
(expense) (22,095) 591 3,352 184,251 --
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments:
Proceeds from sales 3,898,147 637 103,089 140,408 10,922
Cost of investments sold 2,753,110 589 78,050 133,728 11,038
---------- ----- --------- ------- ------
Realized gain (loss)
on sales 1,145,037 48 25,039 6,680 (116)
Realized gain (loss) on
distributions -- 2,809 579,805 23,757 --
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments 1,145,037 2,857 604,844 30,437 (116)
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments:
Beginning of period (54,627) (531) 766,965 191,164 --
End of period (890,692) 2,239 1,830,233 350,670 34,914
---------- ----- --------- ------- ------
Net unrealized gain (loss) on
investments (836,065) 2,770 1,063,268 159,506 34,914
---------- ----- --------- ------- ------
Net gain (loss) on investments 308,972 5,627 1,668,112 189,943 34,798
---------- ----- --------- ------- ------
Net increase in net assets
Resulting from operations $ 286,877 6,218 1,671,464 374,194 34,798
========== ===== ========= ======= ======
<PAGE>
<CAPTION>
Evergreen
Fidelity Evergreen VA
Index Evergreen VA Growth Fidelity
500 VA Foundation and Income Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 88,190 -- 64,531 35,778 2,542
Expenses:
Mortality and expense
charge 35,124 16,661 12,664 15,733 1,700
--------- --------- ------- --------- ------
Net investment income
(expense) 53,066 (16,661) 51,867 20,045 842
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments:
Proceeds from sales 308,101 91,677 72,454 74,834 18,220
Cost of investments sold 195,424 61,931 51,822 50,376 18,141
--------- --------- ------- --------- ------
Realized gain (loss)
on sales 112,677 29,746 20,632 24,458 79
Realized gain (loss) on
distributions 204,265 163,674 57,201 84,677 7,491
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments 316,942 193,420 77,833 109,135 7,570
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments:
Beginning of period 1,017,506 1,039,772 400,773 1,117,994 (3,307)
End of period 3,016,043 1,156,800 615,669 1,178,529 42,058
--------- --------- ------- --------- ------
Net unrealized gain (loss) on
investments 1,998,537 117,028 214,896 60,535 45,365
--------- --------- ------- --------- ------
Net gain (loss) on investments 2,315,479 310,448 292,729 169,670 52,935
--------- --------- ------- --------- ------
Net increase in net assets
Resulting from operations 2,368,545 293,787 344,596 189,715 53,777
========= ========= ======= ========= ======
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income 12,158 47,335 854 62 1,074 1,956
Expenses:
Mortality and expense
charge 1,035 3,810 481 196 258 142
------- --------- ------ ----- ------ -----
Net investment income
(expense) 11,123 43,525 373 (134) 816 1,814
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments:
Proceeds from sales 4,566 1,135,456 1,604 566 786 500
Cost of investments sold 4,545 1,132,889 1,413 553 840 484
------- --------- ------ ----- ------ -----
Realized gain (loss)
on sales 21 2,567 191 13 (54) 16
Realized gain (loss) on
distributions 7,725 17,464 2,724 2,987 305 218
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments 7,746 20,031 2,915 3,000 251 234
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments:
Beginning of period 13,921 6,901 4,376 4,467 (7,291) 1,144
End of period (24,139) -- 36,915 9,701 6,544 2,095
------- --------- ------ ----- ------ -----
Net unrealized gain (loss) on
investments (38,060) (6,901) 32,539 5,234 13,835 951
------- --------- ------ ----- ------ -----
Net gain (loss) on investments (30,314) 13,130 35,454 8,234 14,086 1,185
------- --------- ------ ----- ------ -----
Net increase in net assets
Resulting from operations (19,191) 56,655 35,827 8,100 14,902 2,999
======= ========= ====== ===== ====== =====
See accompanying notes to financial statements.
</TABLE>
3 <PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1997
<CAPTION>
General Wells Wells Fidelity
American Fargo Fargo VIP II
Capital Bank Bank Invest-
Company LAP LAP US Fidelity ment
Money Asset Government VIP Grade
Market Allocation Allocation Growth Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ - 798 29,147 27,119 225,803
Expense:
Mortality and expense
charges 8,153 57 1,790 16,100 13,854
----------- ----- ------ ------- -------
Net investment income
(expense) (8,153) 741 27,357 11,019 211,949
----------- ----- ------ ------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 20,629,339 510 11,595 675,710 235,810
Cost of investments sold 21,128,960 503 11,537 522,627 229,902
----------- ----- ------ ------- -------
Net realized gain
(loss) on sales (499,621) 7 58 153,083 5,908
Realized gain from
distributions 70,508 1,992 1,636 121,391 -
----------- ----- ------ ------- -------
Net realized gain
(loss) on
investments (429,113) 1,999 1,694 274,474 5,908
----------- ----- ------ ------- -------
Net unrealized gain (loss)
on investments:
Beginning of period (616,614) (727) - 152,534 72,512
End of period (54,627) (531) 6,901 766,965 191,164
----------- ----- ------ ------- -------
Net unrealized gain
(loss) on
investments 561,987 196 6,901 614,431 118,652
----------- ----- ------ ------- -------
Net gain (loss)
on investments 132,874 2,195 8,595 888,905 124,560
----------- ----- ------ ------- -------
Net increase (decrease)
in net assets
resulting from
operations $ 124,721 2,936 35,952 899,924 336,509
=========== ===== ====== ======= =======
<PAGE>
<CAPTION>
Fidelity Evergreen
Fidelity Fidelity VIP VA
VIP II VIP High Evergreen Founda-
Index 500 Overseas Income VA tion
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 39,357 3,584 - 14,086 56,929
Expense:
Mortality and expense
charges 20,225 918 322 15,760 10,793
--------- ------- ------ --------- -------
Net investment income
(expense) 19,132 2,666 (322) (1,674) 46,136
--------- ------- ------ --------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 1,153,694 228,191 2,086 1,142,113 718,799
Cost of investments sold 803,888 224,866 2,056 830,948 530,813
--------- ------- ------ --------- -------
Net realized gain
(loss) on sales 349,806 3,325 30 311,165 187,986
Realized gain from
distributions 79,863 14,229 - 192,033 159,412
--------- ------- ------ --------- -------
Net realized gain
(loss) on
investments 429,669 17,554 30 503,198 347,398
--------- ------- ------ --------- -------
Net unrealized gain (loss)
on investments:
Beginning of period 190,361 - - 174,857 90,314
End of period 1,017,506 (3,307) 13,921 1,039,772 400,773
--------- ------- ------ --------- -------
Net unrealized gain
(loss) on
investments 827,145 (3,307) 13,921 864,915 310,459
--------- ------- ------ --------- -------
Net gain (loss)
on investments 1,256,814 14,247 13,951 1,368,113 657,857
--------- ------- ------ --------- -------
Net increase (decrease)
in net assets
resulting from
operations 1,275,946 16,913 13,629 1,366,439 703,993
========= ======= ====== ========= =======
<PAGE>
<CAPTION>
Evergreen
VA Russell Russell
Growth Multi- Aggres- Russell
and Style sive Russell Core
Income Equity Equity Non-US Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 19,339 186 - - 628
Expense:
Mortality and expense
charges 14,415 193 67 93 65
--------- ----- ----- ------ -----
Net investment income
(expense) 4,924 (7) (67) (93) 563
--------- ----- ----- ------ -----
Net realized gain (loss) on
investments:
Proceeds from sales 510,045 612 215 306 204
Cost of investments sold 361,276 603 201 334 202
--------- ----- ----- ------ -----
Net realized gain
(loss) on sales 148,769 9 14 (28) 2
Realized gain from
distributions 152,804 - - - -
--------- ----- ----- ------ -----
Net realized gain
(loss) on
investments 301,573 9 14 (28) 2
--------- ----- ----- ------ -----
Net unrealized gain (loss)
on investments:
Beginning of period 218,007 - - - -
End of period 1,117,994 4,376 4,467 (7,291) 1,144
--------- ----- ----- ------ -----
Net unrealized gain
(loss) on
investments 899,987 4,376 4,467 (7,291) 1,144
--------- ----- ----- ------ -----
Net gain (loss)
on investments 1,201,560 4,385 4,481 (7,319) 1,146
--------- ----- ----- ------ -----
Net increase (decrease)
in net assets
resulting from
operations 1,206,484 4,378 4,414 (7,412) 1,709
========= ===== ===== ====== =====
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1996
<CAPTION>
General Wells
American Fargo Fidelity Evergreen
Capital Bank VIP II Evergreen VA
Company LAP Fidelity Investment Fidelity VA Growth
Money Asset VIP Grade VIP II Evergreen Founda- and
Market Allocation Growth Bond Index 500 VA tion Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ - 348 98 6,207 1,888 14,947 25,649 16,722
Expense:
Mortality and expense charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
---------- ---- --------- ------- ------- ------- ------- -------
Net investment income (expense) (8,455) 329 (9,618) (764) (3,294) 12,033 24,137 13,796
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 9,427,292 545 2,657,607 964,149 996,124 34,167 17,279 36,201
Cost of investments sold 9,821,858 577 2,601,002 967,181 961,682 32,848 16,419 34,638
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on Sales (394,566) (32) 56,605 (3,032) 34,442 1,319 860 1,563
Realized gain from
distributions 662,558 565 2,483 - 4,854 8,720 8,970 4,256
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on Investments 267,992 533 59,088 (3,032) 39,296 10,039 9,830 5,819
---------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain (loss)
on investments:
Beginning of period (477,414) (264) (141) - - - - -
End of period (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
---------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain
(loss) on investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
---------- ---- --------- ------- ------- ------- ------- -------
Net gain on
Investments 128,792 70 211,763 69,480 229,657 184,896 100,144 223,826
---------- ---- --------- ------- ------- ------- ------- -------
Net increase in net
assets resulting from
operations $ 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
========== ==== ========= ======= ======= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) $ (22,095) 591 3,352 184,251 --
Net realized gain (loss) on
investments 1,145,037 2,857 604,844 30,437 (116)
Net unrealized gain (loss) on
investments (836,065) 2,770 1,063,268 159,506 34,914
----------- ------ --------- --------- -------
Net increase (decrease) in
net assets resulting from
operations 286,877 6,218 1,671,464 374,194 34,798
----------- ------ --------- --------- -------
Deposits into Separate Account 24,041,771 8,593 6,194 173,887 --
Withdrawals from Separate
Account (3,248) -- (11,274) (39,907) --
Transfers to (from) Divisions (4,017,154) -- -- 1,104,791 467,531
Policy charges (1,197,941) (1,516) (73,715) (94,401) (10,922)
----------- ------ --------- --------- -------
Net deposits into (with-
drawals from) Separate
Account 18,823,428 7,077 (78,795) 1,144,370 456,609
----------- ------ --------- --------- -------
Increase (decrease) in net assets 19,110,305 13,295 1,592,669 1,518,564 491,407
Net assets, beginning of period 2,291,321 22,749 4,336,723 4,272,712 --
----------- ------ --------- --------- -------
Net assets, end of period $21,401,626 36,044 5,929,392 5,791,276 491,407
=========== ====== ========= ========= =======
<CAPTION>
Fidelity Evergreen Evergreen
Index Evergreen VA VA Fidelity
500 VA Foundation Growth Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) 53,066 (16,661) 51,867 20,045 842
Net realized gain (loss) on
investments 316,942 193,420 77,833 109,135 7,570
Net unrealized gain (loss) on
investments 1,998,537 117,028 214,896 60,535 45,365
---------- --------- --------- --------- ---------
Net increase (decrease) in
net assets resulting from
operations 2,368,545 293,787 344,596 189,715 53,777
---------- --------- --------- --------- ---------
Deposits into Separate Account 798,465 -- -- 500 133,756
Withdrawals from Separate
Account (75,108) -- -- -- (2,393)
Transfers to (from) Divisions 1,972,578 674,306 -- 1,373 713,408
Policy charges (230,998) (74,855) (59,622) (58,890) (17,803)
---------- --------- --------- --------- ---------
Net deposits into (with-
drawals from) Separate
Account 2,464,937 599,451 (59,622) (57,017) 826,968
---------- --------- --------- --------- ---------
Increase (decrease) in net assets 4,833,482 893,238 284,974 132,698 880,745
Net assets, beginning of period 7,408,308 4,306,730 3,401,987 4,327,730 128,428
---------- --------- --------- --------- ---------
Net assets, end of period 12,241,790 5,199,968 3,686,961 4,460,428 1,009,173
========== ========= ========= ========= =========
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) 11,123 43,525 373 (134) 816 1,814
Net realized gain (loss) on
investments 7,746 20,031 2,915 3,000 251 234
Net unrealized gain (loss) on
investments (38,060) (6,901) 32,539 5,324 13,835 951
------- ---------- ------- ------- ------- ------
Net increase (decrease) in
net assets resulting from
operations (19,191) 56,655 35,827 8,100 14,902 2,999
------- ---------- ------- ------- ------- ------
Deposits into Separate Account 161,010 -- -- -- -- --
Withdrawals from Separate Account (2,863) -- -- -- -- --
Transfers to (from) Divisions 1,527 (1,104,624) -- 99,341 86,923 --
Policy charges (7,210) (26,931) (1,137) (381) (541) (360)
------- ---------- ------- ------- ------- ------
Net deposits into (with-
drawals from) Separate
Account 152,464 (1,131,555) (1,137) 98,960 86,382 (360)
------- ---------- ------- ------- ------- ------
Increase (decrease) in net assets 133,273 (1,074,900) 34,690 107,060 101,284 2,639
Net assets, beginning of period 171,993 1,074,889 127,294 45,510 60,934 42,774
------- ---------- ------- ------- ------- ------
Net assets, end of period 305,266 (11) 161,984 152,570 162,218 45,413
======= ========== ======= ======= ======= ======
See accompanying notes to financial statements.
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1997
<CAPTION>
General Wells Wells Fidelity
American Fargo Fargo VIP II
Capital Bank Bank Invest-
Company L&A L&A US Fidelity ment
Money Asset Government VIP Grade
Market Allocation Allocation Growth Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) $ (8,153) 741 27,357 11,019 211,949
Net realized gain (loss)
on investments (429,113) 1,999 1,694 274,474 5,908
Net unrealized gain
(loss) on
investments 561,987 196 6,901 614,431 118,652
------------ ------ --------- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations 124,721 2,936 35,952 899,924 336,509
------------ ------ --------- --------- ---------
Deposits into Separate
Account 8,313,213 8,594 - 52,684 187,438
Withdrawals from
Separate Account (12,409,728) - - (521,876) (78,701)
Transfers to (from)
Divisions (8,186,180) - 1,047,944 464,587 247,811
Policy charges (536,474) (1,267) (9,007) (134,854) (134,974)
------------ ------ --------- --------- ---------
Net deposits into
(withdrawals from)
Separate Account (12,819,169) 7,327 1,038,937 (139,459) 221,574
------------ ------ --------- --------- ---------
Increase (decrease) in
net assets (12,694,448) 10,263 1,074,889 760,465 558,083
------------ ------ --------- --------- ---------
Net assets, beginning of
period 14,985,769 12,486 - 3,576,258 3,714,629
------------ ------ --------- --------- ---------
Net assets, end of period $ 2,291,321 22,749 1,074,889 4,336,723 4,272,712
============ ====== ========= ========= =========
<PAGE>
<CAPTION>
Fidelity Evergreen
Fidelity Fidelity VIP VA
VIP II VIP High Evergreen Founda-
Index 500 Overseas Income VA tion
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) 19,132 2,666 (322) (1,674) 46,136
Net realized gain (loss)
on investments 429,669 17,554 30 503,198 347,398
Net unrealized gain
(loss) on
investments 827,145 (3,307) 13,921 864,915 310,459
--------- -------- ------- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations 1,275,946 16,913 13,629 1,366,439 703,993
--------- -------- ------- --------- ---------
Deposits into Separate
Account 238,135 1,137 1,364 - -
Withdrawals from
Separate Account (935,770) (212,942) - (600,093) (615,829)
Transfers to (from)
Divisions 4,375,652 337,545 157,274 90,397 1,589,962
Policy charges (186,389) (14,225) (274) (126,744) (90,084)
--------- -------- ------- --------- ---------
Net deposits into
(withdrawals from)
Separate Account 3,491,628 111,515 158,364 (636,440) 884,049
--------- -------- ------- --------- ---------
Increase (decrease) in
net assets 4,767,574 128,428 171,993 729,999 1,588,042
Net assets, beginning of
period 2,640,734 - - 3,576,731 1,813,945
--------- -------- ------- --------- ---------
Net assets, end of period 7,408,308 128,428 171,993 4,306,730 3,401,987
========= ======== ======= ========= =========
<PAGE>
<CAPTION>
Evergreen
VA Russell Russell
Growth Multi- Aggres- Russell
and Style sive Russell Core
Income Equity Equity Non-US Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) 4,924 (7) (67) (93) 563
Net realized gain (loss)
on investments 301,573 9 14 (28) 2
Net unrealized gain
(loss) on
investments 899,987 4,376 4,467 (7,291) 1,144
--------- ------- ------ ------ ------
Net increase
(decrease) in net
assets resulting
from operations 1,206,484 4,378 4,414 (7,412) 1,709
--------- ------- ------ ------ ------
Deposits into Separate
Account - - - - -
Withdrawals from
Separate Account - - - - -
Transfers to (from)
Divisions (400,000) 123,754 41,251 68,752 41,251
Policy charges (96,118) (838) (155) (406) (186)
--------- ------- ------ ------ ------
Net deposits into
(withdrawals from)
Separate Account (496,118) 122,916 41,096 68,346 41,065
--------- ------- ------ ------ ------
Increase (decrease) in
net assets 710,366 127,294 45,510 60,934 42,774
Net assets, beginning of
period 3,617,364 - - - -
--------- ------- ------ ------ ------
Net assets, end of period 4,327,730 127,294 45,510 60,934 42,774
========= ======= ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1996
<CAPTION>
General Wells
American Fargo Fidelity Evergreen
Capital Bank VIP II Evergreen VA
Company LAP Fidelity Investment Fidelity VA Growth
Money Asset VIP Grade VIP II Evergreen Founda- and
Market Allocation Growth Bond Index 500 VA tion Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) $ (8,455) 329 (9,618) (764) (3,294) 12,033 24,137 13,796
Net realized gain (loss)
on investments 267,992 533 59,088 (3,032) 39,296 10,039 9,830 5,819
Net unrealized gain (loss)
on investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
----------- ------ --------- --------- --------- --------- --------- ---------
Net increase in net
assets resulting
from operations 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
----------- ------ --------- --------- --------- --------- --------- ---------
Deposits into Separate Account 16,201,970 6,223 1,854,129 1,992,244 1,139,931 1,799,979 899,908 1,799,969
Transfers to (from) Divisions (9,318,249) 3,087 1,757,397 1,878,412 1,439,294 1,696,024 848,012 1,696,024
Policy charges (864,845) (1,318) (241,335) (224,743) (164,854) (116,201) (58,256) (116,251)
----------- ------ --------- --------- --------- --------- --------- ---------
Net deposits into
Separate Account 6,018,876 7,992 3,370,191 3,645,913 2,414,371 3,379,802 1,689,664 3,379,742
----------- ------ --------- --------- --------- --------- --------- ---------
Increase in net assets 6,139,213 8,391 3,572,336 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
Net assets, beginning of period 8,846,556 4,095 3,922 - - - - -
----------- ------ --------- --------- --------- --------- --------- ---------
Net assets, end of period $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
=========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
December 31, 1998
(1) Organization
------------
Security Equity Life Insurance Company Separate Account Thirteen
(the Separate Account) commenced operations on November 15,
1994. The Separate Account is registered under the
Investment Company Act of 1940 (1940 Act) as a unit
investment trust. The Separate Account receives purchase
payments from individual flexible variable life contracts
issued by Security Equity Life Insurance Company (Security
Equity). Security Equity is a subsidiary of General
American Life insurance Company.
The Separate Account is divided into a number of Divisions. Each
Division invests in shares of an underlying portfolio
available to policyholders as directed by the policyholders.
The portfolios available for investment through the Separate
Account are the General American Capital Company Money
Market Fund, Wells Fargo Bank LAP Asset Allocation Fund,
Wells Fargo Bank LAP US Government Allocation Fund, Fidelity
VIP Growth Fund, Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Asset Manager Fund, Fidelity VIP II Index
500 Fund, Fidelity VIP Overseas Fund, Fidelity VIP High
Income Fund, Evergreen VA Fund, Evergreen VA Foundation
Fund, Evergreen VA Growth and Income Fund, Russell Multi-
Style Equity Fund, Russell Aggressive Equity Fund, Russell
Non-US Fund, and the Russell Core Bond Fund.
Investments in the Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Index 500 Fund, Evergreen VA Fund, Evergreen
VA Foundation Fund, and Evergreen VA Growth and Income Fund
Divisions were initiated in the Separate Account for
policyholders during 1996. Investments in the Fidelity VIP
Overseas Fund, Fidelity VIP High Income Fund, Wells Fargo
Bank LAP US Government Allocation Fund, Russell Multi-Style
Equity Fund, Russell Aggressive Equity Fund, Russell Non-US
Fund, and Russell Core Bond Fund Divisions were initiated in
the Separate Account for policyholders during 1997.
Investments in the Fidelity VIP II Asset Manager Fund
Division were initiated during 1998.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following is a summary of significant accounting policies
followed by the Separate Account in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
(a) Investments
-----------
The Separate Account's investments are valued daily
based on the net asset value of the shares held.
The first-in, first-out method is used in
determining the cost of shares sold on
withdrawals by the Separate Account. Share
transactions are recorded on the trade date,
which is the same as the settlement date.
9 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(b) Federal Income Taxes
--------------------
Under current federal income tax law, investment
income or realized capital gains from sales of
investments of the Separate Account are not
taxable. Therefore, no federal income tax
expense has been provided.
(c) Dividend Reinvestment
---------------------
Dividends are recorded on the ex-dividend date and
immediately reinvested on the pay date.
(d) Use of Estimates
----------------
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of increase and decrease in net assets
from operations during the period. Actual
results could differ from those estimates.
(3) Policy Charges
--------------
Charges are deducted from premiums and paid to Security Equity for
providing the insurance benefits set forth in the contracts
and any additional benefits by rider, administering the
policies, reimbursement of expenses incurred in distributing
the policies, and assuming certain risks in connection with
the policies.
The premium payment, less the premium load charge, equals the net
premium. The premium load is deducted from the initial
premium and from each subsequent premium paid by a
policyholder, prior to allocation to the Separate Account.
The premium load includes a distribution charge, a premium
tax charge, and the DAC tax charge.
Distribution Charge: The distribution charge is composed of
-------------------
a premium expense load and a commission charge. The
amount of the distribution charge will depend on the
amount of initial premium and the sales commissions
paid.
Premium Expense Load - The premium expense load will be
--------------------
deducted from each premium and will equal a percentage
of the premium. The percentage will be determined
based on the sum of the initial premiums for all
policies in a case, in accordance with the following
table:
Sum of the initial premiums
of all contracts in the case Premium expense load
---------------------------- --------------------
Less than $250,000 2.00%
$250,000-$999,999 1.50
$1,000,000 and more 1.25
====
10 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
Commission Charge - A commission charge may be deducted from
-----------------
a premium. The commission charge deducted from a
premium will be equal to the full amount of
commissions payable by Security Equity on the target
premium.
Premium Tax Charge: Various states and subdivisions impose
------------------
a tax on premiums received by insurance companies.
Premium taxes vary from state to state. The
percentage deducted from each premium varies based on
the governing jurisdiction of the contract.
DAC Tax Charge: The DAC tax charge is equal to 1% of all
--------------
premiums paid in all contract years.
Charges are deducted monthly from the cash value of each policy to
compensate Security Equity for certain administrative costs,
the cost of insurance, and optional rider benefit charges.
Administrative Costs: Security Equity has responsibility
--------------------
for the administration of the policies and the
Separate Account. As reimbursement for administrative
expenses related to the maintenance of each policy and
the Separate Account, Security Equity assesses a
monthly administrative charge against each policy.
This monthly charge is $4.50 per policy. This cost
may change, but is guaranteed not to exceed $8.00 per
month per policy.
Cost of Insurance: The cost of insurance is deducted on
-----------------
each monthly anniversary for the following policy
month. Because the cost of insurance depends upon a
number of variables, the cost varies for each policy
month. The cost of insurance is determined by
multiplying the applicable cost of insurance rate by
the net amount at risk each policy month.
Optional Rider Benefit Charges: This monthly deduction
------------------------------
includes charges for any additional benefits provided
by rider.
Mortality and Expense Charges: In addition to the above policy
-----------------------------
charges, a daily charge against the operations of each
Division is made for the mortality and expense risks assumed
by Security Equity. The mortality and expense risk charge
assessed against each Division will never exceed an annual
effective rate of .50% of the policy's Separate Account
value attributable to that Division. Currently, the amount
of this charge is an annual effective rate of .35% of the
Separate Account value, which is equivalent to .000957233%
of the Separate Account value attributable to the Division
on a daily basis. The mortality risk assumed by Security
Equity under the contract is that insureds may, on average,
live for shorter periods of time than estimated. The
expense risk assumed by Security Equity under the contract
is the risk that the cost of issuing and administering the
contract may be more than estimated.
11 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(4) Purchases and Sales
-------------------
During the period ended December 31, 1998, purchases and proceeds
from the sales pertaining to the Separate Account were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
General American Capital Company Money Market Fund $23,032,326 3,898,147
Wells Fargo Bank LAP Asset Allocation Fund 11,114 637
Wells Fargo Bank LAP US Government Allocation Fund 17,465 1,135,456
Fidelity VIP Growth Fund 607,355 103,089
Fidelity VIP II Investment Grade Bond Fund 1,492,612 140,408
Fidelity VIP II Asset Manager Fund 467,531 10,922
Fidelity VIP II Index 500 Fund 3,030,384 308,101
Fidelity VIP Overseas Fund 853,600 18,220
Fidelity VIP High Income Fund 175,882 4,567
Evergreen VA Fund 837,980 91,677
Evergreen VA Foundation Fund 121,732 72,454
Evergreen VA Growth and Income Fund 122,304 74,834
Russell Multi-Style Equity Fund 3,577 1,604
Russell Aggressive Equity Fund 102,390 566
Russell Non-US Fund 88,302 787
Russell Core Bond Fund 2,174 500
</TABLE>
12 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(5) Accumulation Unit Activity
--------------------------
For the year ended December 31, 1998, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital Company
Money Market Fund 1,933,223 18,494,161 (3,269,567) 17,157,817
Wells Fargo Bank LAP Asset Allocation Fund 13,509 3,638 0 17,147
Wells Fargo Bank LAP US Government
Allocation Fund 886,655 (21,581) (865,074) 0
Fidelity VIP Growth Fund 2,180,702 (35,749) 0 2,144,953
Fidelity VIP II Investment Grade Bond Fund 3,306,395 32,234 793,085 4,131,714
Fidelity VIP II Index 500 Fund 3,313,560 206,539 761,795 4,281,894
Fidelity VIP Overseas Fund 116,002 94,343 600,908 811,253
Fidelity VIP High Income Fund 147,714 125,991 1,285 274,990
Evergreen VA Fund 2,843,275 (48,125) 441,360 3,236,510
Evergreen VA Foundation Fund 2,334,346 (39,602) 0 2,294,744
Evergreen VA Growth and Income Fund 2,874,370 (37,835) 875 2,837,410
Russell Multi-Style Equity Fund 123,323 (1,193) 0 122,130
Russell Aggressive Equity Fund 41,107 (421) 96,132 136,818
Russell Non-US Fund 68,511 (684) 94,078 161,905
Russell Core Bond Fund 41,107 (397) 0 40,710
Fidelity VIP II Asset Manager Fund 0 (6,458) 278,281 271,823
</TABLE>
For the year ended December 31, 1997, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital Company
Money Market Fund 13,318,334 (4,108,503) (7,276,608) 1,933,223
Wells Fargo Bank LAP Asset Allocation Fund 8,931 4,798 (220) 13,509
Wells Fargo Bank LAP US Government
Allocation Fund - - 886,655 886,655
Fidelity VIP Growth Fund 2,212,740 (236,554) 204,516 2,180,702
Fidelity VIP II Investment Grade Bond Fund 3,124,238 81,752 100,405 3,306,395
Fidelity VIP II Index 500 Fund 1,561,960 (324,326) 2,075,926 3,313,560
Fidelity VIP Overseas Fund - (192,838) 308,840 116,002
Fidelity VIP High Income Fund - 1,205 146,509 147,714
Evergreen VA Fund 3,227,545 (407,318) 23,048 2,843,275
Evergreen VA Foundation Fund 1,585,211 (438,926) 1,188,061 2,334,346
Evergreen VA Growth and Income Fund 3,224,042 - (349,672) 2,874,370
Russell Multi-Style Equity Fund - - 123,323 123,323
Russell Aggressive Equity Fund - - 41,107 41,107
Russell Non-US Fund - - 68,511 68,511
Russell Core Bond Fund - - 41,107 41,107
</TABLE>
13 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
For the year ended December 31, 1996, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital
Company Money
Market Fund 8,266,085 13,774,894 (8,722,645) 13,318,334
Wells Fargo Bank LAP
Asset Allocation
Fund 3,253 5,521 157 8,931
Fidelity VIP Growth Fund 2,774 1,081,685 1,128,281 2,212,740
Fidelity VIP II Invest-
ment Grade Bond Fund - 1,607,694 1,516,544 3,124,238
Fidelity VIP II Index 500 Fund - 653,667 908,293 1,561,960
Evergreen VA Fund - 1,569,119 1,658,426 3,227,545
Evergreen VA Foundation Fund - 755,933 829,278 1,585,211
Evergreen VA Growth and
Income Fund - 1,565,607 1,658,435 3,224,042
</TABLE>
14 (Continued)
<PAGE>
<PAGE>
Schedule 1
----------
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Schedule of Investments
December 31, 1998
<CAPTION>
Number of Market
shares value
------ -----
<S> <C> <C>
General American Capital Company Money Market Fund 1,111,754 $21,402,310
Wells Fargo Bank LAP Asset Allocation Fund 2,680 36,048
Wells Fargo Bank LAP US Government Allocation Fund 6 63
Fidelity VIP Growth Fund 132,159 5,929,959
Fidelity VIP II Investment Grade Fund 446,894 5,791,750
Fidelity VIP II Asset Manager Fund 27,060 491,407
Fidelity VIP II Index 500 Fund 86,676 12,242,963
Fidelity VIP Overseas Fund 50,337 1,009,262
Fidelity VIP High Income Fund 26,478 305,292
Evergreen VA Fund 339,678 5,200,464
Evergreen VA Foundation Fund 254,649 3,687,313
Evergreen VA Growth and Income Fund 286,319 4,460,853
Russell Multi-Style Fund 10,113 162,016
Russell Aggressive Equity Fund 12,015 152,589
Russell Non-US Fund 14,629 162,240
Russell Core Bond Fund 4,253 45,422
</TABLE>
15 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company:
We have audited the accompanying balance sheets of Security Equity Life
Insurance Company as of December 31, 1998 and 1997, and the related
statements of operations and comprehensive income, stockholder's equity,
and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Security
Equity Life Insurance Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
As discussed in Note 1(h) to the financial statements, the Company changed
its accounting policy for the capitalization of acquisition costs in
1998.
April 30, 1999
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1998 and 1997
<CAPTION>
Assets 1998 1997
<S> <C> <C>
Bonds, at fair value $ 59,841,336 58,580,394
Policy loans 4,831,088 4,738,178
Cash and cash equivalents 1,403,321 4,519,584
------------ -----------
Total cash and invested assets 66,075,745 67,838,156
Reinsurance benefits recoverable:
Future policy benefits 4,970,259 5,575,381
Policy and contract claims 1,784,950 1,572,069
Accrued investment income 1,281,720 1,264,239
Goodwill 1,190,301 1,269,661
Deferred policy acquisition costs 17,698,757 14,112,608
Value of business acquired 2,375,000 2,467,000
Deferred tax asset 5,830,710 5,671,074
Other assets 1,247,845 665,967
Separate account assets 403,857,411 290,409,444
------------ -----------
Total assets $506,312,698 390,845,599
============ ===========
Liabilities and Stockholder's Equity
Reserve for future policy benefits 3,161,224 3,426,250
Policyholder account balances 47,409,775 47,594,304
Policy and contract claims 1,140,695 320,358
Other policyholders' funds 18,215 13,733
Unearned revenue 17,139,317 16,079,166
Other liabilities and accrued expenses 2,924,436 4,643,201
Payable to affiliates 136,209 41,307
Separate account liabilities 403,857,411 290,409,444
------------ -----------
Total liabilities 475,787,282 362,527,763
Commitments and contingencies (note 10)
Stockholder's equity:
Common stock, par value $25; 100,000 shares
authorized, issued, and outstanding 2,500,000 2,500,000
Additional paid-in capital 27,447,892 27,447,892
Accumulated other comprehensive income 2,553,998 1,870,338
Accumulated deficit (1,976,474) (3,500,394)
------------ -----------
Total stockholder's equity 30,525,416 28,317,836
------------ -----------
Total liabilities and stockholder's equity $506,312,698 390,845,599
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Operations and Comprehensive Income
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Premiums $ 3,663,368 4,246,718 6,371,662
Net investment income 4,296,760 4,774,386 4,546,544
Universal Life Policy Charges 8,736,733 9,307,665 3,811,896
Other Income 105,456 49,671 19,069
Realized investment gains 13,154 93,385 313,185
----------- ---------- ----------
Total revenues 16,815,471 18,471,825 15,062,356
Benefits and expenses:
Policy benefits 2,946,281 1,326,460 3,309,410
Policy surrenders, net 1,760,448 4,335,709 1,635,498
Change in unearned revenue 1,060,151 9,342,363 1,912,470
Change in reserve for future policy benefits (1,729,615) (5,075,024) (2,757,042)
Interest credited 2,341,796 2,392,355 2,437,432
Commissions 2,097,482 479,380 3,590,084
Change in deferred acquisition costs (2,870,169) (5,578,850) (3,235,101)
General and administrative expenses 4,950,753 5,412,113 4,795,193
Amortization of goodwill 79,360 79,356 79,356
Amortization (accretion) of value of business
acquired, net 91,996 (6,000) (20,000)
Other expenses 4,300,430 4,256,509 3,598,597
----------- ---------- ----------
Total benefits and expenses 15,028,913 16,964,371 15,345,897
Income (loss) from operations before
federal income tax expense (benefit) 1,786,558 1,507,454 (283,541)
Federal income tax expense (benefit):
Current 1,506,379 3,790,833 15,000
Deferred (778,354) (3,243,000) (92,000)
----------- ---------- ----------
Total Federal income tax expense (benefit) 728,025 547,833 (77,000)
----------- ---------- ----------
Income (loss) before cumulative effect of a change
in accounting principle 1,058,533 959,621 (206,541)
Cumulative effect on prior years (to December 31,
1997) of changing to a different capitalization
policy for policy acquistion costs, net of
taxes of $250,593 465,387 - -
----------- ---------- ----------
Net income (loss) 1,523,920 959,621 (206,541)
----------- ---------- ----------
Other comprehensive income (loss) 683,660 1,811,226 (1,931,020)
----------- ---------- ----------
Comprehensive income $ 2,207,580 2,770,847 (2,137,561)
=========== ========== ==========
Pro forma net income assuming the new policy
acquisition costs capitalization method is
applied retroactively $ 1,058,533 1,009,662 61,787
=========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
Accumulated
Additional Other Total
Common paid-in comprehensive Accumulated stockholder's
stock capital income (loss) deficit equity
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 2,500,000 27,447,892 1,990,132 (4,253,474) 27,684,550
Net loss - - - (206,541) (206,541)
Other comprehensive loss - - (1,931,020) - (1,931,020)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 2,500,000 27,447,892 59,112 (4,460,015) 25,546,989
Net income - - - 959,621 959,621
Other comprehensive income - - 1,811,226 - 1,811,226
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1997 $2,500,000 27,447,892 1,870,338 (3,500,394) 28,317,836
Net income - - - 1,523,920 1,523,920
Other comprehensive income - - 683,660 - 683,660
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 $2,500,000 27,447,892 2,553,998 (1,976,474) 30,525,416
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,523,920 959,621 (206,541)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Change in:
Reinsurance benefits ceded 329,241 1,337,497 441,300
Accrued investment income (17,481) (33,756) 48,733
Other assets (581,879) 211,321 372,746
Deferred policy acquisition costs, net (2,870,169) (5,578,850) (3,235,101)
Policy liabilities (449,553) (3,496,036) (1,004,266)
Policy and contract claims 820,337 (1,173,980) (682,499)
Other policyholders' funds 4,482 (7,990) (3,341)
Federal income tax payable (550,832) 709,833 15,000
Change in unearned revenue reserve 1,060,151 9,342,363 1,912,470
Other liabilities and accrued expenses (1,171,844) (2,669,279) 4,317,546
Payable to affiliates 94,902 (34,203) 23,725
Accretion of bond premiums, net 157,165 130,011 189,350
Deferred tax expense (benefit) (527,761) (3,243,000) (92,000)
Net (gain) loss on sale of investments (13,154) (93,385) (313,185)
Amortization of goodwill 79,360 79,356 79,356
Amortization (accretion) of value of
business acquired 91,996 (6,000) (20,000)
----------- ------------ -----------
Net cash provided by (used in)
operating activities (2,021,119) (3,566,477) 1,843,293
----------- ------------ -----------
Cash flows from investing activities:
Purchase of investments (4,950,790) (6,925,121) (12,790,361)
Sale or maturity of investments 4,597,722 9,153,009 15,141,063
Increase in policy loans, net (92,910) 343,771 (557,046)
----------- ------------ -----------
Net cash provided by (used in)
investing activities (445,978) 2,571,659 1,793,656
----------- ------------ -----------
Cash flows from financing activities:
Policyholder account balances:
Deposits on interest-sensitive life
contracts 73,457,292 147,698,966 48,448,968
Transfers to separate account for
interest-sensitive life contracts, net (73,453,479) (147,718,944) (48,468,986)
----------- ------------ -----------
Net cash provided by (used in)
financing activities 3,813 (19,978) (20,018)
----------- ------------ -----------
Net increase (decrease) in cash and
cash equivalents (3,116,263) (1,014,796) 3,557,298
Cash and cash equivalents at beginning of year 4,519,584 5,534,380 1,977,082
----------- ------------ -----------
Cash and cash equivalents at end of year $ 1,403,321 4,519,584 5,534,380
=========== ============ ===========
Supplemental disclosure of cash flow
information -- taxes paid $ 2,057,000 3,081,000 -
=========== ============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1998 and 1997
=============================================================================
(1) General Information and Summary of Significant Accounting Policies
Security Equity Life Insurance Company (SELIC or the Company) is a
wholly owned subsidiary of General American Life Insurance Company
(General American or the Parent). On December 31, 1993, Security
Mutual Life Insurance Company of New York (Security Mutual) sold
100% of the Company's stock to General American, as approved by
the State of New York Department of Insurance.
In 1986, the Company commenced direct writing of universal life
and term business, and in 1987 began marketing a single premium
whole life policy. In 1984, the Company began assuming single
premium deferred annuity (SPDA) and other insurance business
through reinsurance agreements with Security Mutual. The SPDA and
ordinary life insurance blocks of business were recaptured by
Security Mutual in 1992.
SELIC is licensed in 40 states and the District of Columbia.
Insurance operations have generally been limited to the sale of
individual life insurance products (term and universal life) made
through the general agency system, including career agents and
brokers.
With the sale of SELIC by Security Mutual to General American,
SELIC's activities have been redirected to serving the insurance
needs of publicly held corporations and New York state residents.
Additionally, SELIC focuses on accessing numerous and alternative
distribution channels in addition to a general agency system.
SELIC markets Corporate Owned Life Insurance (COLI) primarily
through specially designed variable products.
The acquisition of Security Equity by General American was
accounted for as a purchase transaction and, accordingly, the
purchase price was allocated to the assets and liabilities
acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. These allocations have
been reflected, or "pushed down," in the financial statements of
the Company. The total purchase price of $19,947,892 was
allocated among the fair value of tangible net assets of
$15,997,813, value of business acquired of $2,363,000, and
goodwill of $1,587,079 at the date of acquisition.
The accompanying financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of
financial statements requires the use of estimates by management
which affect the amounts reflected in the financial statements.
Actual results could differ from those estimates.
The significant accounting policies of the Company are as follows:
(a) Recognition of Policy Revenue and Related Expenses
Policy revenue recognition varies depending upon the type of
insurance product. For traditional life products with fixed and
guaranteed premiums and benefits, such as whole life and term
insurance policies, premiums are recognized when due. Benefits
and other expenses
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
of these products are associated with earned premiums and other
sources of earnings so as to result in recognition of profits over
the life of the contracts. This association is accomplished by
means of the provision for liabilities for future benefits and the
deferral and amortization of policy acquisition costs. Premiums
collected on universal life-type policies are reported as deposits
to the policyholder account balance and not as income to SELIC.
Income to SELIC on these policies consists of the assessments for
mortality costs, surrenders, and expenses.
(b) Investment Securities
At December 31, 1998 and 1997, all long-term securities are
carried at fair value with the unrealized gain (loss), net of tax
impact, being reflected as a separate component of stockholder's
equity as the Company considers all long-term securities as
available-for-sale. Short-term investments are carried at cost
which approximates fair value. Policy loans are valued at
aggregate unpaid balances. The fair value of policy loans is
assumed to equal the carrying value because the loans have no
fixed maturity date and, therefore, it is not practicable to
determine a fair value.
Realized gains or losses on the sale of securities are determined
on the basis of specific identification and include the impact of
any related amortization of premium or accretion of discount which
is generally computed consistent with the interest method.
(c) Value of Business Acquired
Value of business acquired (VOBA) represents the present value of
future profits resulting from the acquisition of insurance
policies in a purchase transaction. VOBA is amortized in
proportion to the estimated premiums or gross profits, depending
on the type of contract, with accretion of interest on the
unamortized discounted balance. In 1998, 1997 and 1996,
amortization of VOBA was $222,000, $134,000 and $121,000, and the
accretion of interest on the unamortized balance was $130,000,
$140,000 and $141,000, respectively. The carrying value of VOBA
is periodically evaluated to ascertain recoverability from future
operations. Impairment would be recognized in current operations
when determined.
(d) Goodwill
Goodwill, representing the excess of purchase price over the fair
value of assets acquired, is amortized on a straight-line basis
over 20 years. The carrying value of goodwill is periodically
evaluated to ascertain recoverability from future operations.
Impairment would be recognized in current operations when
determined.
(e) Reserve for Future Policy Benefits
Liabilities for future benefits on life policies are established
in amounts adequate to meet the estimated future obligations on
policies in force. Liabilities for future policy benefits on
certain life insurance policies are computed using the net level
premium method and are based upon assumptions as to future
investment yield, mortality, and withdrawals.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
Mortality and withdrawal assumptions for all policies have been
based on various actuarial tables which are consistent with the
Company's own experience. Liabilities for future benefits on
certain long-duration life insurance contracts are carried at
accumulated policyholder values.
(f) Federal Income Taxes
The Company is taxed as a life insurance company under the Deficit
Reduction Act of 1984. The Company establishes deferred taxes
under the asset and liability method of SFAS No. 109, Accounting
for Income Taxes, and deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
The Company files its federal income tax return as a separate
entity.
(g) Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on a
basis consistent with terms of the risk transfer reinsurance
contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to
reinsurance ceded for future policy benefits and claim liabilities
have been reported as assets for these items, and commissions and
expense allowances received in connection with reinsurance ceded
have been accounted for in income as earned over the anticipated
reinsurance contract life. Reinsurance does not relieve the
Company from its primary responsibility to meet claim obligations.
(h) Deferred Policy Acquisition Costs and Unearned Revenues
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable.
Such costs may include commissions, as well as certain costs of
policy issuance and underwriting. Also, certain charges which are
assessed to contract holders at the inception of the contract are
deferred as unearned revenues. These deferred costs and revenues
are amortized based on and in relation to the estimated gross
profit streams of the underlying business. In 1998, 1997 and
1996, the Company deferred $5,100,000, $5,900,000 and $2,400,000,
respectively, in acquisition costs and recognized amortization of
$2,100,000, $336,000 and ($798,000), respectively. During 1998, 1997,
and 1996, the Company deferred certain contract charge revenues of
$4,400,000, $8,000,000, and $2,300,000, respectively and recognized
amortization of $1,600,000, $1,000,000, and ($480,000), respectively.
During 1997 a policyholder utilized their "free-look" provision of
their variable life contract written in 1996 which resulted in the
return of approximately $13 million in contract deposits to the
policyholder. Accordingly, the Company wrote off $1.5 million of
related deferred acquisition costs associated with the contract
which were capitalized in 1996.
Prior to 1998, commission expenses and premium taxes were the only
acquisition costs deferred by the Company. During 1998, the
Company changed its accounting policy to defer other acquisition
costs, such as marketing and underwriting, in its calculation of
deferred acquisition costs. This change was adopted to provide
for an accounting
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
policy which is consistent with that of its parent and has been
applied retroactively. The effect of the change in 1998 was to
increase income by $715,980. The adjustment of $415,387, after
reduction for income taxes of $250,593 to apply the new policy
retroactively is included in income in 1998. The pro forma amounts,
net of tax, shown on the income statement have been adjusted for the
effect of retroactive application of the change in policy.
(i) Separate Account Business
The assets and liabilities of the separate account represent
segregated funds administered and invested by the Company for
purposes of funding variable life insurance contracts for the
exclusive benefit of variable life insurance contract holders.
The Company receives administrative fees from the separate account
and retains varying amounts of withdrawal charges to cover
expenses in the event of early withdrawals by contract holders.
The assets and liabilities of the separate account are carried at
market value.
(j) Fair Value Disclosures
Fair value disclosures are required under SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. Such fair
value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument.
Although fair value estimates are calculated using assumptions
that management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates should
be used with care. The following assumptions were used to
estimate the fair market value of each class of financial
instrument for which it was practicable to estimate fair value:
Invested assets - Fixed maturities (Bonds) are valued using quoted
---------------
market prices, if available. If quoted market prices are not
available, fair value is estimated using quoted market prices of
similar securities. The carrying value of policy loans
approximates fair value.
Policyholder account balances - The fair value of policyholder
-----------------------------
account balances is equal to the discounted estimated future cash
flows using discounted cash flow calculations, based on interest
rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts being
valued. The carrying value approximates fair value at December
31, 1998 and 1997.
Cash and short-term investments - The carrying amount is a
-------------------------------
reasonable estimate of fair value.
(k) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial paper,
and repurchase agreements with original or remaining maturities of
90 days or less when purchased.
(l) Reclassification
Certain amounts in the 1996 and 1997 financial statements have
been reclassified to conform to the 1998 presentation.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(2) Investments
The sources of net investment income (principally interest)
follow:
<TABLE>
<CAPTION>
===================================================================================
1998 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $3,996,895 4,161,182 4,291,428
Short-term investments 157,456 278,606 75,110
Policy loans and other 287,761 409,406 260,276
-----------------------------------------------------------------------------------
4,442,112 4,849,194 4,626,814
Investment expenses 145,352 74,808 80,270
-----------------------------------------------------------------------------------
Net investment income $4,296,760 4,774,386 4,546,544
===================================================================================
</TABLE>
The amortized cost and estimated fair value of bonds at December
31, 1998 and 1997 are shown below. Fair value is based upon
market prices obtained from independent pricing services.
<TABLE>
<CAPTION>
============================================================================================
1998
--------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $18,244,322 2,368,205 164,359 20,448,168
Corporate securities 35,997,741 2,173,872 529,901 37,641,712
Mortgage-backed securities 1,670,046 81,410 0 1,751,456
--------------------------------------------------------------------------------------------
$55,912,109 4,623,487 694,260 59,841,336
============================================================================================
</TABLE>
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
<TABLE>
<CAPTION>
==============================================================================================
1997
----------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 6,387,244 369,801 148 6,756,897
Corporate securities 36,700,238 2,523,621 153,514 39,070,345
Mortgage-backed securities 12,615,469 323,476 185,793 12,753,152
----------------------------------------------------------------------------------------------
$55,702,951 3,216,898 339,455 58,580,394
==============================================================================================
</TABLE>
The amortized cost and estimated fair value of bonds at December
31, 1998 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
===================================================================================
Estimated
Amortized market
cost value
-----------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,297,987 1,302,600
Due after one year through five years 4,784,883 4,871,814
Due after five years through ten years 7,371,362 7,713,857
Due after ten years 40,787,831 44,201,609
Mortgage-backed securities 1,670,046 1,751,456
-----------------------------------------------------------------------------------
$55,912,109 59,841,336
===================================================================================
</TABLE>
Proceeds from the sale, call, and maturity of investments in
bonds during 1998, 1997, and 1996 were $4,597,724, $9,153,009,
and $15,141,063, respectively. Gross gains of $84,860, $346,842,
and $381,856 and gross losses of $0, $253,457, and $68,671 were
realized on those sales in 1998, 1997, and 1996, respectively.
The Company has bonds on deposit with various state insurance
departments with an amortized cost of approximately $2,388,000
and $2,387,000 at December 31, 1998 and 1997, respectively.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(3) Reinsurance
The Company reinsures certain risks with other insurance
companies as the Company sets a maximum retention amount
(currently $125,000) to help reduce the loss on any single
policy.
Premiums and related reinsurance amounts for the years ended
December 31, 1998, 1997, and 1996 as they relate to transactions
with affiliates are summarized as follows:
<TABLE>
<CAPTION>
============================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Reinsurance premiums ceded $1,154,059 1,489,006 1,632,262
Policy benefits ceded 574,307 (23,067) 1,397,188
============================================================================================
</TABLE>
Premiums and related reinsurance amounts for the years ended
December 31, 1998, 1997, and 1996 as they relate to transactions
with non-affiliates are summarized as follows:
<TABLE>
<CAPTION>
============================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with non-affiliates:
Reinsurance premiums ceded $5,585,519 5,352,578 5,744,060
Policy benefits ceded 3,132,174 463,458 3,824,327
============================================================================================
</TABLE>
The Company remains contingently liable with respect to any
reinsurance ceded and would become actually liable if the
assuming company was unable to meet its obligations under the
reinsurance treaty.
(4) Federal Income Taxes
A reconciliation of the Company's "expected" federal income tax
expense (benefit), computed by applying the federal U.S.
corporate tax rate of 35% to income (loss) from operations before
federal income tax expense (benefit), is as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
==================================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $625 528 (99)
Amortization of intangibles, net 60 26 21
Other, net 43 (6) 1
--------------------------------------------------------------------------------------------------
Federal income tax expense (benefit) $728 548 (77)
==================================================================================================
<CAPTION>
==================================================================================================
Total income taxes were allocated as follows: 1998 1997 1996
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for income taxes from continuing operations $ 728 548 (77)
Tax effect of cumulative effect of change in accounting 251 0 0
Income tax from shareholder's equity:
Unrealized holding gain on debt and equity securities
Recognized for financial reporting purposes 368 1,839 (1,059)
--------------------------------------------------------------------------------------------------
Total income tax $1,347 2,387 (1,136)
==================================================================================================
</TABLE>
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
December 31, 1998 and 1997 are presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
=================================================================================
1998 1997
---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy acquisition costs $ 1,003 4,897
Reserves 3,024 3,380
Capital loss carry-forward 0 101
Unearned Revenue 5,999 1,307
---------------------------------------------------------------------------------
Total gross deferred tax assets 10,026 9,685
Less valuation allowance - -
---------------------------------------------------------------------------------
Net deferred tax assets 10,026 9,685
---------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 1,374 1,023
Other, net 2,821 2,991
---------------------------------------------------------------------------------
Total gross deferred tax liabilities 4,195 4,014
---------------------------------------------------------------------------------
Net deferred tax asset $ 5,831 5,671
=================================================================================
</TABLE>
On December 31, 1993, General American purchased 100% of the
Company. Pursuant to the acquisition, the election was made under
Internal Revenue Code Section 338(h)(10) to treat the purchase of
stock as a purchase of assets for tax purposes. As a result, a
revaluation of the tax bases of the Company's assets and
liabilities was made in connection with the acquisition.
The Company believes that a valuation allowance with respect to
the realization of the total gross deferred tax asset is not
necessary. In assessing the realization of deferred tax assets,
the Company considers whether it is more likely than not that the
deferred tax assets will be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary
differences become deductible. Although the Company has a limited
history of earnings, its Parent does have a long history of
earnings. Pursuant to Internal Revenue Service regulations, the
Company cannot file a consolidated tax return with its Parent
until five years following the acquisition. However, after five
years, the Company will be able to file a consolidated tax return
with its Parent, and realization of the gross tax asset will not
be dependent solely on the Company's ability to generate its own
taxable income. General American has a proven history of earnings
and it appears more likely than not that the Company's gross
deferred tax asset will ultimately be fully realized.
The Company filed its federal income tax return on a consolidated
basis with Security Mutual prior to 1994. In connection with the
Company's transfer of stock ownership, Security Mutual agreed to
assume all unpaid tax liability incurred prior to the date of
sale.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(5) Related-Party Transactions
The Company purchases certain administrative services from General
American. Charges for services performed are based upon personnel
and other costs involved in providing such services. The expenses
incurred for these services were $508,000, $578,000, and $529,000
for 1998, 1997, and 1996, respectively.
Effective January 1, 1994, the Company entered into an
administrative service agreement with Security Mutual. Under the
agreement, Security Mutual provides for the administration of
policies issued through December 31, 1993. The expenses incurred
for these services were $1,420,538, $1,467,364, and $1,621,268 for
1998, 1997, and 1996, respectively.
On November 18, 1997, General American elected to surrender their
existing VUL policy which was purchased from the Company in
November 1996. General American incorporated the cash value from
their surrendered policy of $2,965,211 with an additional
contribution of $37,400,000 to purchase another VUL policy with
the Company totaling $40,365,211.
(6) Pension, Incentive, and Health and Life Insurance Benefit Plans
Associates of SELIC participate in a noncontributory multi-
employer defined benefit pension plan jointly sponsored by SELIC
and General American. The benefit is accrued are based on the
number of years of service and compensation level of each
participant. No pension expense was recognized in 1998, 1997, and
1996 due to overfunding of the plan.
In addition, in 1995 SELIC adopted an associate bonus plan
applicable to full-time exempt associates. Bonuses are based on
an economic value-added model prepared annually by the Company.
Total bonuses accrued to Company employees were $54,000 and
$302,000 in 1998 and 1997, respectively.
In order to attract and retain highly qualified Non-Employee
Directors, the Company enacted an arrangement under which Non-
Employee Directors may elect to reduce their current Director's
Compensation in exchange for future benefits. This plan, known as
the Security Equity Deferred Compensation Plan for Non-Employee
Directors, was adopted and effective as of April 15, 1995. The
deferred liabilities were $331,000, $222,000, and $117,000 in
1998, 1997, and 1996, respectively.
SELIC provides for certain health care and life insurance benefits
for retired employees in accordance with Statement of Financial
Accounting Standards No. 106, Employer's Accounting for
Postretirement Benefits Other Than Pensions (SFAS No. 106). SFAS
No. 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services. The amounts involved are not material.
(7) STATUTORY FINANCIAL INFORMATION
The Company is subject to financial statement filing requirements
of the State of New York Department of Insurance, its state of
domicile, as well as the states in which it transacts business.
Such financial statements, generally referred to as statutory
financial statements, are prepared on a basis of accounting which
varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include: (1)
charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed
using required valuation standards which may vary in methodology
utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting
and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield
stabilization on fixed maturity dispositions prior to maturity
with asset valuation reserves based on statutorily determined
formulae and interest stabilization reserves designed to level
yields over their original purchase maturities; (5) deferred
premiums provided for statutory mean reserves; (6) annuity
contract deposits represent funds deposited by policyholders and
are included in premiums or contract charges; (7) non-recognition
of certain assets as nonadmitted through a direct charge to
surplus; and (8) valuation of investments in bonds at amortized
cost.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The stockholder's equity (surplus) and net gain/(loss) of the
Company at December 31, 1998, 1997, and 1996, as determined using
statutory accounting practices, is summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================
1998 1997 1996
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surplus as reported to
regulatory authorities $11,691,630 13,420,004 12,441,081
Net gain/(loss) reported
to regulatory authorities (1,745,154) 1,090,066 (2,778,942)
=========================================================================================
</TABLE>
(8) DIVIDEND RESTRICTIONS
Dividend payments by the Company are restricted by state insurance
laws as to the amount that may be paid as well as requiring the
prior notice and approval of the State of New York Department of
Insurance. The Company did not pay a dividend in 1998, 1997, or
1996.
(9) RISK-BASED CAPITAL
The insurance departments of various states, including the
Company's domiciliary state of New York, impose risk-based capital
(RBC) requirements on insurance enterprises. The RBC calculation
serves as a benchmark for the regulation of life insurance
companies by state insurance regulators. The requirements apply
various weighted factors to financial balances or activity levels
based on their perceived degree of risk.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The RBC guidelines define specific capital levels where action by
the Company or regulatory authorities is required based on the
ratio of a company's actual total adjusted capital (sum of capital
and surplus and asset valuation reserve) to control levels
determined by the RBC formula. At December 31, 1998, the
Company's actual total adjusted capital was well in excess of
minimum levels which would require action by the Company or
regulatory authorities under the RBC formula.
(10) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under a non-
cancelable lease which expires in August 2003. The future minimum
lease obligations under the terms of the lease are summarized as
follows:
====================================================================
Year ended December 31, 1999 $130,690
Year ended December 31, 2000 $136,291
Year ended December 31, 2001 $141,892
Year ended December 31, 2002 $147,497
Year ended December 31, 2003 $153,094
--------------------------------------------------------------------
Rent expense totaled approximately $110,780, $86,700, and $82,700
in 1998, 1997, and 1996, respectively.
(11) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS), No. 130,
"Reporting Comprehensive Income," effective for years beginning
after December 15, 1997. SFAS No. 130 establishes standards for
reporting and display or comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-
purpose financial statements. The most significant items of
comprehensive income are net income and changes in unrealized
gains and losses on securities. The adoption of SFAS No. 130 does
not affect results of operations or financial position, but
affects their presentation and disclosure. The Company has
adopted SFAS No. 130 as of January 1, 1998, and the following
summaries present the components of the Company's comprehensive
income, other than net income, for the periods ending December 31,
1998, 1997, and 1996:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
1998
===========================================================================================
Before tax (Expense) Net of tax
amount benefit amount
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains arising
during the period $1,064,939 (372,729) 692,210
Less: reclassification adjustment
for gains realized in net income (13,154) 4,604 (8,550)
-------------------------------------------------------------------------------------------
Other comprehensive income 1,051,785 (368,125) 683,660
===========================================================================================
</TABLE>
12
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1997
===================================================================================================
Before tax (Expense) Net of tax
amount benefit amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains arising
during the period $2,879,887 (1,007,961) 1,871,926
Less: reclassification adjustment
for gains realized in net income (93,385) 32,685 (60,700)
---------------------------------------------------------------------------------------------------
Other comprehensive income 2,786,502 (975,276) 1,811,226
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1996
===================================================================================================
Before tax (Expense) Net of tax
amount benefit amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding losses arising
during the period $(2,657,615) 930,165 (1,727,450)
Less: reclassification adjustment
for gains realized in net income (313,185) 109,615 (203,570)
---------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (2,970,800) 1,039,780 (1,931,020)
===================================================================================================
</TABLE>
13
<PAGE>
<PAGE>
PROSPECTUS VERSION B
<PAGE>
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
SECURITY EQUITY LIFE INSURANCE COMPANY
84 BUSINESS PARK DRIVE, SUITE 303
ARMONK, NY 10504
TEL: (914) 273-1290
This Prospectus describes the Individual Flexible Premium Variable Life
Insurance Contract (the "Contract") offered by Security Equity Life
Insurance Company ("SELIC" or the "Company"). The Contract is designed
to provide lifetime insurance protection to age 100 and at the same time
provide maximum flexibility to vary premium payments and change the
level of death benefits payable under the Contract. This flexibility
allows a Contract Holder to provide for changing insurance needs under a
single insurance Contract. A Contract Holder also has the opportunity to
allocate Net Premiums among several investment portfolios with different
investment objectives.
The Contract provides for: (1) a Net Cash Value that can be obtained by
surrendering the Contract; (2) Contract loans; and (3) a Death Benefit
payable at the Insured's death. Contract Holders may also attach a rider
that amends the Contract to instead provide insurance coverage on the
lives of two Insureds, with proceeds payable upon the death of the last
surviving Insured. As long as a Contract remains in force, the Death
Benefit will not be less than the current Face Amount of the Contract. A
Contract will remain in force so long as its Net Cash Value is
sufficient to pay certain monthly charges imposed in connection with the
Contract.
During the "Free Look" period, Net Premiums are allocated to the Money
Market Division as specified in Appendix A. After the end of the "Free
Look" period, Net Premiums may be allocated to one or more of the
Available Divisions of the Separate Account or to the Fixed Fund. If
Net Premiums are allocated to the Separate Account, the duration of the
Contract and the amount of the Insurance Account Value will vary to
reflect the investment performance of the Available Divisions selected
by the Contract Holder, and depending on the Death Benefit option
elected, the amount of the Death Benefit above the minimum may also vary
with that investment performance. The Contract Holder bears the entire
investment risk for all amounts allocated to the Separate Account; there
is no minimum guaranteed Insurance Account Value.
Each Available Division of the Separate Account 13 will invest in one of
the Underlying Portfolios shown in Appendix A. The accompanying
Prospectuses for these portfolios describe the investment objectives and
policies, and the risks of the portfolios. This Prospectus generally
describes only the portion of the Contracts involving the Available
Divisions of the Separate Account. For a brief summary of the Fixed
Fund, see "The Fixed Fund".
<PAGE>
<PAGE>
It may not be advantageous to purchase a Contract as a replacement for
another type of life insurance or as a means to obtain additional
insurance protection if the purchaser already owns another Flexible
Premium Variable Life Insurance Contract. Within certain limits, a
Contract Holder may return the Contract, or convert it to a Contract
that provides benefits that do not vary with the investment results of
Available Divisions by exercising the Conversion Right.
This Prospectus must be accompanied or preceded by the current
prospectuses for the Underlying Portfolios listed in Appendix A.
The contract is not a deposit or obligation of, or guaranteed or
endorsed by, any bank or depository institution, and the contract is not
federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other agency, and involves investment
risk, including possible loss of principal amount invested.
These securities have not been approved or disapproved by the Securities
and Exchange Commission, nor has the Commission passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The Contracts are not available in all states.
This prospectus does not constitute an offering in any jurisdiction in
which such offering may not be lawfully made. No dealer, salesman, or
other person is authorized to give any information or make any
representations in connection with this offering other than those
contained in this Prospectus, and if given or made, such other
information or representations must not be relied upon.
Please read this Prospectus carefully and retain it for future
reference.
The date of this Prospectus is May 1, 1999
- 2 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
Summary of Contract 06
Explanation of a Case
Purpose of the Contract
The Contract Holder and Beneficiary
Availability of the Contract
Joint Insureds
Contract Values
The Separate Account
Death Benefit
Premiums
Charges and Deductions
Contract Loans
Surrender and Partial Withdrawals
Termination
Illustrations
Replacement of Existing Coverage
Tax Considerations
Free Look and Conversion Rights
Definitions 13
Information About SELIC 17
The Separate Account 17
The Contract 19
Availability of Insurance Coverage
Evidence of Insurability
Premiums
Contract Values
Transfers
Contract Loan Privilege
Surrender and Partial Withdrawals
Death Benefits Under the Contract
Charges and Deductions 34
Premium Load
Daily Charges
Monthly Charges
- 3 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
Underwriting Charges
Annual Charges
Other Charges
Termination 40
Maturity Date
Termination for Insufficient Net Cash Value
Reinstatement of a Contract Terminated for Insufficient Value
The Fixed Fund 42
General Description
Allocation of Amounts to the Fixed Fund
Fixed Fund Benefits
Fixed Fund Insurance Account Value
Fixed Fund Transfers, Surrenders, Partial Withdrawals and
Contract Loans
Federal Income Tax Considerations 45
Additional Provisions of the Contract 51
Addition, Deletion, or Substitution of Investments
Incontestability
Conversion Rights
Misstatement of Age or Sex
Suicide
Availability of Funds
Entire Contract
Representations in Application
Contract Application and Contract Schedules
Right to Amend Contract
Computation of Contract Values
Claims of Creditors
Notice
Assignments
Construction
Severability
State Variations
- 4 -
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
Unisex Requirements Under Montana Law 55
Records and Reports 55
Sale of the Contract 56
Voting Rights 56
State Regulation of the Company 57
Management of the Company 58
Legal Matters 60
Legal Proceedings 60
Experts 60
Additional Information 60
Financial Statements 61
Appendix A - Underlying Portfolios A-1
Appendix B - Contract Riders B-1
Appendix C - Illustrations of Death Benefits and Insurance
Account Value C-1
- 5 -
<PAGE>
<PAGE>
SUMMARY OF THE CONTRACT
Throughout this summary, the terms "you" and "your" refer to the owner
of the policy. The policy's owner may or may not be one of the persons
insured under the policy. The terms "we," "us," and "our" refer to
Security Equity Life Insurance Company.
The information in this section is just a summary, written in "laymen's
terms" to help you understand the policy. However, both your policy and
this prospectus are legal documents. If you have any questions about
them, you should contact your agent or other competent professional
advisers. You should see Appendix B for modifications to this summary in
the event that riders are added to the contract.
In preparing this summary, we assume that the policy is in force and
that you have not borrowed any of the cash value.
EXPLANATION OF CONTRACT AND CASE
The contract is the agreement between you and us under which we provide
benefits on the life of an insured. Although your contract is treated
as an individual contract, it is also linked to a case. A case is a
grouping of one or more contracts linked together by a non-arbitrary
factor, such as a common employer of each insured. We determine what
constitutes a case. A case may have one contract holder (i.e., a single
entity owns all the contracts in the case) or as many contract holders
as there are contracts in the case. We determine your contract's
premium load, minimum initial premiums, and underwriting standards based
on the characteristics of the case to which your contract belongs.
PURPOSE OF THE CONTRACT
The contract offers a means to obtain insurance protection on the life
of someone in whom you have an insurable interest. We will pay a death
benefit to the beneficiary upon the death of the insured, so long as the
contract remains in force. You may use the contract's accumulated
values and benefits for any valid purpose. Unlike traditional life
insurance, which provides a guaranteed insurance account value, your
insurance account value under the contract will vary to reflect the
investment results of the underlying funds and/or the interest credited
to the fixed fund, depending on which accounts you allocate your
premiums.
Life insurance is not a short-term investment. You should evaluate your
need for insurance and the contract's long-term investment potential and
risks before purchasing a contract.
- 6 -
<PAGE>
<PAGE>
THE CONTRACT HOLDER AND BENEFICIARY
The contract holder is the individual or entity named in the
application, unless subsequently changed on our records. The contract
holder retains all rights and responsibilities of ownership pertaining
to its interest in the contract. These right and responsibilities
include: (1) the right to allocate premiums among account options; (2)
the obligation to pay premiums; (3) the right to borrow against the
policy; (4) the right to take partial withdrawals; and (5) the right to
surrender the contract.
The beneficiary is also named in the application, unless subsequently
changed on our records. You have the right to change a revocable
beneficiary with prior written notice to us. The beneficiary will
receive the insurance benefits payable upon the death of the insured.
THE INSURED HAS NO DIRECT OR INDIRECT INTEREST IN THE CONTRACT, UNLESS:
- -----------------------------------------------------------------------
(1) YOU ARE THE INSURED, (2) YOU ASSIGN THE RIGHT TO DESIGNATE THE
- ------------------------------------------------------------------
BENEFICIARY TO THE INSURED, OR (3) YOU AND WE OTHERWISE AGREE.
- -------------------------------------------------------------
The contract is a long-term investment designed to provide a death
benefit to the beneficiary and should be purchased for this purpose.
You may use the death benefit and net cash value for various planning
purposes. However, the contracts are not liquid investments (partial
withdrawals may be currently taxable and contract loans and partial
withdrawals may significantly affect death benefits and cash value, and
cause the contract to lapse). In addition, if the performance of the
available divisions to which you allocate the insurance account value is
not sufficient to provide proceeds for your planning purpose, or if you
do not pay sufficient premiums, then your contracts may not achieve your
purpose and may lapse. Before you purchase for a specialized purpose,
you should consider whether the long-tem nature of the contracts and the
potential impact of any contemplated contract loans and partial
withdrawals are consistent with such purpose. Using the contracts for a
specialized purpose may also have tax consequences.
AVAILABILITY OF THE CONTRACT
We offer the contract only to individuals, corporations, partnerships,
sole proprietorships, associations, trusts, and other similar or related
entities, which meet certain suitability standards. You may purchase
the contract to acquire insurance on the life of a person in whom you
have an insurable interest. If you purchase a contract without an
insurable interest, you may incur adverse financial and tax
consequences.
JOINT INSUREDS
You may add a rider to the contract that provides insurance coverage on
the lives of two insureds. In such a contract, we will pay the death
benefit on the death of the last surviving insured. Most of the
discussions in this prospectus that reference a single insured may also
be read as though the single insured were the two insureds under a joint
contract. Certain discussions in the prospectus are modified if a joint
and last survivor rider is added to the contract. See Appendix B --
"Joint and Last Survivor Rider."
- 7 -
<PAGE>
<PAGE>
CONTRACT VALUES
You may allocate net premiums to one or more available divisions and/or
the fixed fund. To the extent you allocate net premiums to the
available divisions: (1) the insurance account value will, and the
death benefit may, vary with the investment performance of the chosen
available divisions; (2) you bear the entire investment risk associated
with the investments of the selected available divisions; and (3) there
is no guaranteed minimum insurance account value. To the extent you
allocate net premiums to the fixed fund, the insurance account value
will accrue interest at a guaranteed minimum rate.
THE SEPARATE ACCOUNT
You have several separate account divisions to which you can allocate
net premiums, subject to certain limitations set forth in the contract.
A list of the available divisions appears in Appendix A. Each available
division of the separate account invests its assets in shares or units
of an underlying portfolio managed by one or more investment managers.
Each underlying portfolio has a different investment objective which is
described in the prospectus for the underlying portfolio. The
underlying fund prospectuses accompany this prospectus.
We may add and/or delete available divisions from time to time. We will
notify you in writing of any such change.
DEATH BENEFIT
We will pay the death benefit to the named beneficiary upon the death of
the insured. The amount of the death benefit depends on which the death
benefit option is in effect. So long as the contract remains in force,
the minimum death benefit under each of the death benefit options will
be equal to at least the contract's current face amount.
PREMIUMS
You have considerable flexibility as to both the timing and the amount
of premium payments. We will not issue a contract unless we receive an
initial premium payment that is equal to at least one year's worth of
the contract's monthly charges plus any premium loads. We may allow a
reduced initial premium for certain contracts. Subsequent premium
payments must be at least $50. You may pay subsequent premiums at any
time and as often as you like, subject to certain restrictions. Please
see the "The Contract -- Premiums" section. If your initial and
subsequent premiums are too low, your insurance coverage may cease.
We will allocate your initial net premium to the money market division
during the free look period. After the free look period expires, you
may allocate the insurance account value among the available divisions
of the separate account and the fixed fund. Thereafter, you may
transfer the insurance account value among the available divisions of
the separate account and the fixed fund by written request, subject to
certain restrictions. You may transfer your insurance account value by
dollar amounts or by percentages.
- 8 -
<PAGE>
<PAGE>
CHARGES AND DEDUCTIONS
In order to cover our expenses, we deduct certain charges from your
premiums and insurance account value. We briefly describe these charges
below. For more detailed information, you should see the "Charges and
Deductions" section. For information regarding the investment advisory
fees and operating expenses of the underlying portfolios, you should see
the chart below.
The following table shows a summary of the operating expenses of the
funds as reported for the fiscal year ending December 31, 1998.
<TABLE>
- ------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS
- ------------------------------------------------------------------------
<CAPTION>
INVESTMENT FUND TOTAL EXPENSE
- ------------------------------------------------------------------------
<S> <C>
Evergreen Variable Trust
- ------------------------------------------------------------------------
Evergreen VA Fund 1.0000%
- ------------------------------------------------------------------------
Evergreen VA Foundation Fund 1.0000%
- ------------------------------------------------------------------------
Evergreen VA Growth and Income Fund 1.0000%
- ------------------------------------------------------------------------
Frank Russell Investment Management Company
- ------------------------------------------------------------------------
Aggressive Equity Fund 1.2500%
- ------------------------------------------------------------------------
Core Bond Fund 0.8000%
- ------------------------------------------------------------------------
Multi-Style Equity Fund 0.9200%
- ------------------------------------------------------------------------
Non-U.S. Fund 1.3000%
- ------------------------------------------------------------------------
General American Capital Company
- ------------------------------------------------------------------------
Money Market Fund 0.2050%
- ------------------------------------------------------------------------
Variable Insurance Products Fund
- ------------------------------------------------------------------------
Equity-Income Portfolio 0.4863%
- ------------------------------------------------------------------------
Growth Portfolio 0.5863%
- ------------------------------------------------------------------------
High Income Portfolio 0.5824%
- ------------------------------------------------------------------------
Overseas Portfolio 0.7363%
- ------------------------------------------------------------------------
Variable Insurance Products Fund II
- ------------------------------------------------------------------------
Asset Manager Portfolio 0.5363%
- ------------------------------------------------------------------------
Index 500 Portfolio 0.2400%
- ------------------------------------------------------------------------
Investment Grade Bond Portfolio 0.4324%
- ------------------------------------------------------------------------
Contrafund Portfolio 0.5863%
- ------------------------------------------------------------------------
Variable Insurance Products Fund III
- ------------------------------------------------------------------------
Balanced Portfolio 0.4363%
- ------------------------------------------------------------------------
Janus Aspen Series
- ------------------------------------------------------------------------
Growth Portfolio 0.7000%
- ------------------------------------------------------------------------
Worldwide Growth Portfolio 0.7400%
- ------------------------------------------------------------------------
Balanced Portfolio 0.8300%
- ------------------------------------------------------------------------
</TABLE>
- 9 -
<PAGE>
<PAGE>
Premium Load. We deduct a premium load from your initial premium and
each subsequent premium. The premium load includes: (1) a distribution
charge, which consists of a premium expense load and a commission
charge; (2) a premium tax charge, which covers state premium taxes; and
(3) a federal tax charge.
In the first year, the distribution charge equals a maximum of 30% of
the premiums paid, up to one target premium, and 2% of premiums
thereafter. Thereafter, the distribution charge declines as a
percentage of premiums paid as follows:
* for years 2-10 the distribution charge equals a maximum of 10% of
premiums paid during each year, up to a target premium, and 2% of
premiums thereafter;
* for years 11-15 the distribution charge equals a maximum of 8% of
premiums paid during each year, up to a target premium, and 2% of
premiums thereafter; and
* for years 16 and thereafter the distribution charge equals a
maximum of 4% of premiums paid during each year, up to a target
premium, and 2% of premiums thereafter.
The premium tax charge reflects the state premium taxes imposed under
the contract. The federal tax charge equals 1% of all premiums paid in
all years.
Mortality and Expense. We charge a fee for the mortality and expense
that we assume under the contract. We calculate and deduct the daily
fee based upon a percentage of your insurance account value attributable
to each division of the separate account. Currently, this daily fee
equals 35 basis points (0.35%) on an annual basis. We guarantee that
this fee will not exceed 50 basis points (0.50%) on an annual basis.
Monthly Charges. We deduct monthly charges directly from your insurance
account value as of the contract date and each month thereafter.
Monthly charges include an administration charge of $4.50 per month
(guaranteed not to exceed $8.00 per month) and a charge for the cost of
insurance. Monthly charges also include any charges for additional
benefits provided by riders and charges for a special class rating, if
applicable.
Underwriting Charge. We will deduct an underwriting charge, not to
exceed $100, on the issue date of the contracts that we issue on a
medically underwritten basis. We deduct a similar charge following
medical underwriting in connection with certain changes in the contract.
This charge changes if you add a joint and last survivor rider. See
Appendix B. We may reduce or waive the underwriting charge under
certain circumstances.
Loan Charges. On each anniversary of the contract, your insurance
account value is: (i) reduced by loan interest due and unpaid for the
previous year; and (ii) increased by the interest credited to the
borrowed fund during the previous year. As a result, if you do not pay
loan interest when due, then on the contract's anniversary, we will
reduce your insurance account value by the difference between the loan
interest due and unpaid for the previous year and the interest credited
to the borrowed fund during the previous year.
- 10 -
<PAGE>
<PAGE>
Other Charges. We do not currently charge a fee for federal, state, or
local taxes that we incur that may be attributable to the separate
account. However, we may impose such a charge in the future to provide
for any tax liability incurred by the separate account.
Investment advisory fees and operating expenses of the underlying
portfolio are paid out of the amounts invested in the portfolios. These
charges appear in Appendix A.
At your request, we will provide policy illustrations in addition to the
reports we customarily provide. Depending upon the type and complexity
of the illustration, we may charge a reasonable fee, not to exceed $50.
CONTRACT LOANS
You may obtain a loan under your contract. The amount you may borrow is
subject to a maximum. Interest will be charged for any amount borrowed
in accordance with the loan interest rate option you select.
We will deduct the amount of a loan from: (1) the amount payable on
surrender of the contract; and (2) the death benefit proceeds. Interest
on loans accrues daily. Unpaid interest is capitalized each year and
added to the loan. Depending upon the investment performance of the
available divisions and the amounts borrowed, loans could cause your
contract to lapse. If your contract lapses with a loan outstanding, you
may be subject to adverse tax consequences. Contract loans may also have
other federal income tax consequences. Please see the "Federal Income
Tax Considerations" section.
SURRENDER AND PARTIAL WITHDRAWALS
As long as the insured is alive, you may surrender your contract for its
net cash value by submitting a written request to our home office. To
the extent that you have allocated your insurance account value to the
available divisions of the separate account, we do not guarantee a
minimum net cash value. As long as the insured is alive, you may
withdraw a portion of your net cash value, subject to certain
restrictions. Please see the "The Contract -- Surrender and Partial
Withdrawals" section.
Surrender and partial withdrawals may have federal income tax
consequences. Please see the "Federal Income Tax Considerations"
section.
TERMINATION
The contract will not automatically terminate if you fail to pay
subsequent premiums. However, your contract may terminate prior to its
maturity date if it has insufficient net cash value to pay monthly
charges.
- 11 -
<PAGE>
<PAGE>
ILLUSTRATIONS
The illustrations provided in this prospectus or used in connection with
the purchase of your contract are based on hypothetical rates of return.
We provide these hypothetical rates of return only for the purposes
illustrating the contract. The rate are not guaranteed, nor should they
be deemed to be a representation of past or potential investment
performance. Your actual rates of return may be more or less than those
in the illustrations and, therefore, your actual values will be
different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a contract, you should consider whether it would be
more advantageous to change, or add to, an existing contract. It is
generally not advisable to purchase another insurance contract as a
replacement for existing coverage. You should carefully consider this
if your decision to replace a policy is based solely on a comparison of
contract illustrations.
TAX CONSIDERATIONS
We intend for the contract to satisfy the definition of "life insurance"
under Section 7702 of the Internal Revenue Code. Under certain
circumstances, a contract may be a "modified endowment contract" under
federal tax law. Whether a contract is a modified endowment contract
depends on the amount of premium payments made in relation to the death
benefit. We will monitor your contract and attempt to notify you on a
timely basis if your contract is in jeopardy of becoming a modified
endowment contract. The tax status of contracts issued with a
supplemental term insurance rider, or a joint and last survivor rider,
is less clear. For further discussion of the tax status of a contract
and the tax consequences of being treated as a life insurance contract
or a modified endowment contract, please see the "Federal Income Tax
Considerations" section.
FREE LOOK AND CONVERSION RIGHTS
In most states, you may cancel your contract within the later of: (1)
10 days after receiving it; (2) 10 days after we mail or personally
deliver the notice of withdrawal right to you; or (3) within 45 days
after the date of the application. If you wish to exercise your free
look rights, you must return your contract to us at our home office
along with written notice of cancellation. If you so cancel your
contract, it will be as though it had never been issued. We will pay
you a refund if you cancel your contract. The refund will equal any
premium(s) paid, minus any partial withdrawals and loans together with
accrued but unpaid interest.
Once the contract is issued and is in force, you may transfer all of
your insurance account value out of the separate account and into the
fixed fund and receive fixed and guaranteed benefits during the first 24
months of the contract. Once you exercise this right, you will not be
able to transfer amounts out of the fixed fund and all net premiums paid
thereafter will be allocated to the fixed fund.
- 12 -
<PAGE>
<PAGE>
DEFINITIONS
See Appendix B for modifications to Definitions in the event that riders
are added to the Contract.
ATTAINED AGE: The Insured's Issue Age under the Contract plus the
number of completed Contract Years.
APPLICATION: The application form that must be completed by any
purchaser of the Contract, before the Contract can be issued.
AVAILABLE DIVISION: A Division of the Separate Account to which Net
Premiums may be allocated or Separate Account Value or Fixed Fund
Insurance Account Value may be transferred under the Contracts. Each
Available Division invests exclusively in the shares of a corresponding
Underlying Portfolio listed in Appendix A.
BENEFICIARY: The person(s), entity or entities named on SELIC's records
to receive the insurance proceeds payable under the Contract after the
Insured dies.
BORROWED FUND: An account established in SELIC's General Account for
any amounts transferred from the Available Divisions and the Fixed Fund
and held as collateral for Contract Loans. (See "Contract Loan
Privilege").
CASE: A grouping of one or more Contracts connected by a non-arbitrary
factor, presented to SELIC as a group. (An example of such a factor is a
common employer for the Insureds under each Contract in the grouping).
(See "Explanation of a Case").
CONTRACT: The Flexible Premium Variable Life Insurance Contract offered
by SELIC that is described in this Prospectus.
CONTRACT ANNIVERSARY: An anniversary of the Contract Date. It marks
the start of a new Contract Year.
CONTRACT DATE: The date used to begin calculating Monthly Charges and
Annual Charges under the Contract. It will be shown in the Contract.
CONTRACT HOLDER: The owner of the Contract, as shown in the records of
SELIC. All of the rights and benefits of the Contract belong to the
Contract Holder, unless otherwise stated in the Contract.
CONTRACT LOAN: An amount borrowed by the Contract Holder from the
Insurance Account Value of the Contract.
CONTRACT MONTH: Each one month period commencing on the Contract Date
and on each Monthiversary thereafter.
- 13 -
<PAGE>
<PAGE>
CONTRACT YEAR: Each successive twelve month period starting on the
Contract Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit payable to the Beneficiary when the Insured
dies.
DEATH BENEFIT OPTION ACCUMULATION RATE: The rate at which Premiums are
accumulated for purposes of calculating Death Benefit Option 3.
DIVISION: A sub-account of the Separate Account. Only Available
Divisions (described in this Prospectus) are available for investment
under the Contracts.
EMPLOYER: A corporation, partnership, sole proprietorship, association,
trust, and other similar or related entity. Affiliated Employers are
considered one Employer.
EXCESS PREMIUM: Any amount of Premium paid in a Contract Year over and
above the Target Premium.
FACE AMOUNT: The amount of insurance under the contract, excluding any
Supplemental Term Insurance Amount. The Initial Face Amount on the
Issue Date is shown in the Contract. Thereafter, it may change in
accordance with the terms of the Contract.
FIXED FUND: The portion of the Insurance Account Value allocated to the
Company's General Account (excluding the Borrowed Fund).
GOVERNING JURISDICTION: The state or jurisdiction in which the Contract
is delivered and whose laws govern its terms. The Governing
Jurisdiction is set forth in the Contract.
HOME OFFICE: The principal administrative office of SELIC, which is
located at 84 Business Park Drive, Suite 303, Armonk, NY 10504.
INITIAL NET PREMIUM: The Initial Premium paid under the Contract less
the applicable Premium Load.
INITIAL PREMIUM: The first Premium paid under the Contract.
INSURANCE ACCOUNT VALUE: The total amount that a Contract provides for
investment at any time. It is equal to the total of the amounts
credited to the Contract Holder in the Separate Account, the Fixed Fund,
and the Borrowed Fund.
INSURED: The person whose life is insured under the terms of the
Contract. The Insured is shown in the Contract.
ISSUE AGE: The Insured's age at his/her nearest birthday as of the
Contract Date.
- 14 -
<PAGE>
<PAGE>
ISSUE DATE: The day the Initial Premium is received and accepted by
SELIC. This is also the date that insurance coverage becomes effective.
All Contract values based on the Separate Account are determined
beginning on the Issue Date. The Issue Date is shown in the Contract.
MATURITY DATE: The date on which the Contract will mature. The
Maturity Date is shown in the Contract.
MAXIMUM LOAN AMOUNT: The maximum amount of Insurance Account Value that
can be borrowed by the Contract Holder under the Contract.
MINIMUM INSURANCE COVERAGE: The minimum amount of Total Insurance
Coverage, which includes any Supplemental Term Insurance Amount, under
the Contract. It is currently $25,000.
MINIMUM PREMIUM: The Minimum Premium is equal to the Minimum Net
Premium plus any applicable Premium Load.
MINIMUM NET PREMIUM: The Minimum Net Premium at any time is equal to 12
times the Monthly Charges for the first month in the then current
Contract Year.
MONTHIVERSARY: The first day of each Contract Month. It is the day as
of which Monthly Charges are deducted from the Insurance Account Value.
The Monthiversary and the Contract Date coincide, except in months in
which the Monthiversary falls on a day which is not a Valuation Day. In
such months, the Valuation Day is deemed to fall on the next Valuation
Day. If any Monthiversary would fall on the 29th, 30th, or 31st of a
month that does not have that number of days, then the Monthiversary is
deemed to be the last day of that month.
MONTHLY CHARGES: The Contract charges that are deducted monthly from
Insurance Account Value. Monthly Charges include the Administration
Charge, the Cost of Insurance Charge, any Monthly Charges for benefits
provided by Contract rider, and any charges for special insurance class
rating. (See "Charges and Deductions").
NET AMOUNT AT RISK: The Net Amount at Risk is calculated on any
Monthiversary by subtracting the Insurance Account Value from the Death
Benefit, discounted one month at a 4.00% assumed annual effective
interest rate.
NET CASH VALUE: The Contract's Insurance Account Value minus any
Contract Loan balance and interest accrued thereon and unpaid.
NET PREMIUM: The amount of a Premium less applicable Premium Load.
PLANNED RENEWAL PREMIUM: An amount of Premium, specified in the
Application, which the Contract Holder anticipates will be paid in each
Contract Year after the first.
PREMIUM: Premiums are the payments made to SELIC under the Contract by
the Contract Holder to purchase insurance on the life of the Insured and
to contribute to the Insurance Account Value of the Contract. Each
Premium amount may consist of Target Premium, Excess Premium, or both.
- 15 -
<PAGE>
<PAGE>
PREMIUM LOAD: An amount deducted from each Premium prior to allocation
of the Premium to the Separate Account and/or the Fixed Fund. Premium
Load includes the Distribution Charge (comprised of a Premium Expense
Load and a Commission Charge), a Premium Tax Charge and a Federal Tax
Charge.
SELIC: Security Equity Life Insurance Company, the issuer of the
Contract.
SEPARATE ACCOUNT: A separate investment account established by the
Board of Directors of SELIC to support the benefits payable under the
Contract. Each Available Division of the Separate Account invests in a
single corresponding Underlying Portfolio.
SEPARATE ACCOUNT VALUE: The portion of the Contract's Insurance Account
Value invested in the Separate Account. It will be equal to the
Contract's Insurance Account Value, less the total of amounts in the
Borrowed Fund and in the Fixed Fund.
SUPPLEMENTAL TERM INSURANCE AMOUNT: The amount of insurance provided by
the Supplemental Term Insurance Rider, if any. This amount is shown in
the Contract. The Supplemental Term Insurance Rider is described in
Appendix B.
TARGET PREMIUM: An amount of Premium used to determine Premium Loads
under the Contract. The annual Target Premium is based upon the Face
Amount and is shown in the Contract. For Contracts with a Face Amount
equal to the Minimum Face Amount, the Target Premium will be zero (0).
TOTAL INSURANCE COVERAGE: Total amount of insurance, including coverage
provided by any Supplemental Term Insurance Rider under the Contract.
UNDERLYING PORTFOLIO: An investment portfolio, managed by one or more
investment managers, the shares or units of which comprise the
investment of an Available Division of the Separate Account.
VALUATION DAY: A day that is a regular business day of SELIC and that
the New York Stock Exchange (or its successor) is open for trading.
Each Valuation Day ends at the Valuation Time.
VALUATION TIME: The close of trading on the New York Stock Exchange (or
any successor exchange), which is generally 4 p.m. Eastern Time.
VALUATION PERIOD: The period of time between Valuation Days. A
Valuation Period begins immediately after the Valuation Time on the
previous Valuation Day and ends as of the Valuation Time on the next
succeeding Valuation Day.
- 16 -
<PAGE>
<PAGE>
INFORMATION ABOUT SELIC
SELIC is a stock life insurance company domiciled in New York. It is an
indirect subsidiary of GenAmerica Corporation, an intermediate stock
holding company, which is, in turn, wholly-owned by General American
Mutual Holding Company, a mutual holding company organized under
Missouri law.
SELIC was established in 1983 as a wholly-owned subsidiary of Security
Mutual Life Insurance Company of New York..
SELIC is admitted to sell life insurance and annuities in 40 states and
the District of Columbia. SELIC concentrates on sales of corporate
owned life insurance products in all of these jurisdictions and sales of
individual products to residents of New York.
THE SEPARATE ACCOUNT
Security Equity Life Insurance Company Separate Account 13 (the "Separate
Account") was established by SELIC as a Separate Investment Account on
December 30, 1994. The Separate Account will receive and invest the Net
Premiums paid under this Contract and allocated to it. In addition, the
Separate Account may receive and invest Net Premiums for other flexible
premium variable life insurance contracts that might be issued by SELIC.
The Separate Account is currently divided into a number of Divisions. Not all
Divisions are available for allocation of Net Premiums and transfers under
the Contract. Each Available Division invests exclusively in shares of an
Underlying Portfolio listed in Appendix A. Both realized and unrealized gains
or losses and income from the assets of each Division of the Separate Account
are credited to or charged against that Division without regard to income,
gains, or losses from any other Division of the Separate Account or from any
other business SELIC may conduct.
Obligations to Contract Holders and Beneficiaries that arise under the
Contract are obligations of SELIC. SELIC owns the assets of the Separate
Account. Those assets will only be used to support variable life insurance
contracts and for any other purposes permitted by applicable laws and
regulations. The portion of the assets of the Separate Account equal to the
reserves and other
-17-
<PAGE>
<PAGE>
contract liabilities with respect to the Separate Account will not be
charged with liabilities that arise from any other business SELIC may
conduct. SELIC may, however, transfer from the Separate Account to its
General Account assets that exceed the reserves and other contract
liabilities in respect of the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Separate Account meets
the definition of a "separate account" under the federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices of the Separate Account, the Contracts, or SELIC by the
Commission.
There is no assurance that the stated objectives of any Underlying Portfolio
will be achieved.
Detailed information concerning the investment objectives, techniques and
restrictions pertaining to each Underlying Portfolio, and the expenses,
investment advisory services, and risks attendant to allocating Insurance
Account Value to each Underlying Portfolio, can be found in the current
prospectus with respect to each Underlying Portfolio, which accompanies this
Prospectus, and the current Statement of Additional Information for each
Underlying Portfolio. Such information has been prepared by the Underlying
Portfolio or the investment company of which it is a part, and SELIC is not
responsible for preparing this information. The Underlying Portfolio
prospectuses should be read carefully before any decision is made concerning
the allocation of Premium payments or transfers among the Available
Divisions.
Not all of the investment portfolios described in the accompanying
prospectuses are necessarily available under the Contract. Moreover, SELIC
cannot guarantee that each Underlying Portfolio will always be available for
the Contract. In the unlikely event that an Underlying Portfolio becomes
unavailable, SELIC will attempt to secure the availability of a comparable
Underlying Portfolio. Shares and units of each Underlying Portfolio are
purchased and redeemed at Net Asset Value, without a sales charge.
One or more of the Underlying Portfolios are available for investment by both
variable life insurance and variable annuity separate accounts. It is
conceivable that in the future it may be disadvantageous for both variable
life and variable annuity separate accounts to invest simultaneously in an
Underlying Portfolio that sells its shares to both types of separate
accounts. The Board of Directors or Trustees of such Underlying Portfolios,
the respective investment advisers of each Underlying Portfolio, and SELIC
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events of conflicts. Material conflicts
could arise from such things as changes in state insurance laws, changes in
federal income tax laws, changes in the investment management of an
Underlying Portfolio, or differences in the voting instructions given by
variable annuity contract owners and variable life insurance contract owners.
In the event of a material irreconcilable conflict, SELIC will take steps
necessary to protect our Contract Holders. This could include discontinuance
of investment in an Underlying Portfolio.
-18-
<PAGE>
<PAGE>
THE CONTRACT
The Contract is a flexible premium variable life insurance contract that
provides insurance on the life of an Insured. A Contract may be sold
together with other related Contracts forming a Case. See Appendix B for
modifications to this Section in the event that a Joint and Last Survivor
Rider and/or a Supplemental Term Insurance Rider is added to the Contract.
Availability of Insurance Coverage
To be eligible for insurance under the Contract, a prospective Insured must
on the Contract Date:
(1) be at least 20 years of age and no more than 85 years of age;
(2) have elected or consented to be an Insured (if required by SELIC or the
Governing Jurisdiction); and
(3) have satisfied any necessary underwriting requirements of SELIC (see
"Charges and Deductions -- Monthly Charges -- Cost of Insurance
Charge").
A Contract can be issued if the Contract Holder:
(1) provides SELIC with the data it requires including, but not limited to
the prospective Insured's name, address, social security number,
sex, date of birth, smoker/nonsmoker status, and citizenship
(SELIC may also require submission of related documents that have
been completed by the prospective Insured);
(2) requests Total Insurance Coverage at least equal to the Minimum
Insurance Coverage for an Insured;
(3) designates the Beneficiary under the Contract; and
(4) pays the initial Minimum Premium for the first Contract Year.
Insurance coverage generally begins on the Issue Date for the Contract.
Temporary life insurance coverage may be provided under the terms of a
temporary insurance agreement. In accordance with SELIC's underwriting rules,
temporary life insurance coverage may not exceed the greater of $100,000 or
two times the Premium paid, and may not be in effect for more than 90 days.
This temporary insurance coverage will be issued on a conditional receipt
basis, which means that any Death Benefit under such temporary coverage will
only be paid if the Insured meets SELIC's usual and customary underwriting
standards for the applied-for coverage under the Contract (see "Charges and
Deductions -- Monthly Charges -- Cost of Insurance Charge").
As provided for under state insurance law, a Contract Holder, to preserve
insurance age of the Insured, may be permitted to backdate the Contract. In
no case may the Contract Date be more
-19-
<PAGE>
<PAGE>
than six months prior to the date that the Application was completed.
If any Contract in a Case is backdated, then all Contracts in the Case
must be backdated to the same date. Monthly Charges for the backdated
period will be deducted as of the Contract Date, and each Monthiversary
thereafter.
For modifications to this Section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider."
Evidence of Insurability
SELIC may require medical evidence of insurability for any Contract that does
not meet SELIC's guaranteed issue or simplified issue standards when the
Contract is issued. (See "Charges and Deductions -- Monthly Charges -- Cost
of Insurance Charge"). Medical evidence of insurability may also be required
for any transaction that increases the Net Amount at Risk for the Contract.
Transactions that increase the Net Amount at Risk may include but are not
limited to: payment of subsequent Premiums, change of Death Benefit Option,
change of Face Amount, partial withdrawals, and reinstatement of a Contract.
For modifications to this section for Joint Insureds, see Appendix B -- Last
Survivor Rider.
Premiums
Premiums are the payments made to SELIC under the Contract to purchase
insurance on the life of the Insured and to contribute to the Insurance
Account Value of the Contract. All Premiums are payable to SELIC at its Home
Office. A Premium Load is deducted from any Premium received by SELIC prior
to its allocation to the Separate Account or to the Fixed Fund. The
resulting amount is the Net Premium. The applicable Premium Load percentage
depends upon the Case to which the Contract belongs, whether the Premium
consists of Target Premium or Excess Premium, and the Contract Year in which
the Premium is paid. (See "Charges and Deductions -- Premium Load).
Premiums may consist of Target Premium, Excess Premium or both. The Target
Premium depends upon the Insured's Issue Age, sex, underwriting class and
Face Amount. The Target Premium for the initial Face Amount is determined to
be the level annual premium payable to age 100 for a level death benefit that
under guaranteed cost of insurance rates and guaranteed policy expense
charges and a 4.00% net interest rate (after the M&E charge) the cash value
will accumulate to equal the initial Face Amount at age 100. The Target
Premium is determined on the Issue Date. It is not recalculated if there is
an increase in the Face Amount. It is recalculated if there is a decrease in
the Face Amount, but only if the new Face Amount is below the initial Face
Amount. The amount of the Target Premium is shown in your policy.
SELIC has the right to refund promptly any amount of Premium paid if
necessary to keep the Contract in compliance with state and federal laws,
including federal income tax laws. In particular, if a Contract Holder pays
Premium amounts during the first Contract Year significantly in excess of the
Planned Renewal Premium, SELIC reserves the right to refund
-20-
<PAGE>
<PAGE>
promptly part or all of such excess if applicable state insurance law
restricts the amount of commissions that would otherwise be payable to
the writing agent in connection with part or all of such Premium amounts.
SELIC will not issue the Contract unless it receives a Premium payment at
least equal to the initial Minimum Premium amount. The initial Minimum
Premium under the Contract is equal to twelve times the Monthly Charges due
under the Contract in the first Contract Month, plus any applicable Premium
Load. SELIC may, in its sole discretion, require a reduced initial Minimum
Premium in connection with the purchase of Contracts sold by licensed agents
of SELIC that are also registered representatives of Walnut Street
Securities, Inc. ("Walnut Street"), the distributor of the Contracts, or
selected broker-dealers or through banks that have entered into written sales
agreements with Walnut Street.
After the Initial Premium has been received and accepted by SELIC, the
Contract Holder may pay subsequent Premiums on any Valuation Day provided
that each subsequent Premium is at least $50 per Contract. All payments
received by SELIC from the Contract Holder will be credited to the Contract
as Premiums, unless the Contract Holder specifies that such payments are
Contract Loan repayments. Subsequent Premiums may cause a Contract that was
not classified as a "modified endowment contract" to become classified as
such a contract. SELIC will take steps to monitor subsequent Premiums, and
will notify a Contract Holder if a subsequent Premium, or a portion thereof,
would cause a Contract to become a modified endowment contract. (See
"Federal Income Tax Considerations -- Modified Endowment Contracts")
Allocation of Net Premiums: Generally, the initial Net Premium will be
credited to the Money Market Division of the Separate Account and the
Insurance Account Value will begin to vary with investment experience on the
Valuation Day next following receipt of the initial payment at the Home
Office. However, in situations where SELIC receives the initial payment with
the application and underwriting is required, then the payment will be held
on deposit in SELIC's General Account until underwriting is completed and the
Contract is issued (the Issue Date). Any Net Premiums received during the
Free Look period will be allocated to the Money Market Division. At the end
of such period, Separate Account Value will be allocated to or among any of
the Available Divisions and the Fixed Fund, in accordance with the Contract
Holder's allocation instructions set forth in the Application, or as
subsequently changed prior to the end of the Free Look period. No allocation
or transfer instructions received from the Contract Holder in the Application
or during the Free Look period will be acted upon until the Free Look period
has expired. The duration of the Free Look period depends upon the law of a
Contract's Governing Jurisdiction. The Free Look period under a Contract
will expire after the number of days provided for in the applicable Governing
Jurisdiction's Free Look period has elapsed following the date the Contract
is delivered to the Contract Holder, as evidenced by a signed delivery
receipt or certified mail return receipt, or if later, 10 days after SELIC
mails or personally delivers the Notice of Withdrawal Right to the Contract
Holder, or 45 days after the Application is signed. Transfer of money to the
Available Divisions and, or the Fixed Fund specified by the Contract Holder
will occur at the expiration of the Free Look period.
If you decide to cancel your contract during the free look period, we will
pay you a refund. The refund will equal any premium(s) paid, minus any partial
withdrawals and loans together with accrued but unpaid interest.
-21-
<PAGE>
<PAGE>
Net Premiums received after the Free Look period expires will be allocated
among the Available Divisions and the Fixed Fund in accordance with the
Contract Holder's instructions. Net Premiums that are received prior to the
Valuation Time on any Valuation Day will be allocated as of the date they are
received. Net Premiums received after such time will be allocated on the next
Valuation Day.
The maximum number of Available Divisions to which the Contract's Separate
Account Value may be allocated at any one time is five; amounts can also be
allocated to the Fixed Fund. If no instructions accompany a Premium, the
resulting Net Premium will be allocated to the Available Divisions and the
Fixed Fund in the same proportions as stated in the most recently recorded
Premium allocation instructions SELIC received from the Contract Holder.
The allocation of subsequent Premiums may be changed at any time upon SELIC's
receipt of written notice from the Contract Holder.
Premiums to Prevent Lapse: If the Contract is in danger of lapsing because
the Net Cash Value is insufficient to pay the Monthly Charges for the
Contract on a Monthiversary, the amount of Premium that must be paid to
prevent lapse will be equal to three times the Monthly Charges then due plus
any applicable Premium Load. (See "Termination -- Termination for
Insufficient Cash Value"). SELIC will send a notice to a Contract Holder
when such Premiums are required to keep the Contract in force.
Premiums to Reinstate a Contract: When a Contract has lapsed due to
insufficient Net Cash Value, the amount of Premium that must be paid to
reinstate insurance coverage will be equal to the Monthly Charges due and
unpaid at the time of lapse, plus three times the Monthly Charges due at the
time of reinstatement, plus any applicable Premium Load. (See "Termination --
Reinstatement of a Contract Terminated for Insufficient Value). When the
Contract has terminated, SELIC will send a notice specifying the Premiums
that are required to be paid to reinstate the Contract.
Contract Values
The Insurance Account Value of the Contract is equal to the total amounts of
the Insurance Account Value in each Available Division of the Separate
Account, the Insurance Account Value in the Fixed Fund, and the Insurance
Account Value in the Borrowed Fund.
The Insurance Account Value allocated to each Available Division is measured
in "Accumulation Units." The value of an Accumulation Unit is determined as
of the Valuation Time on each Valuation Day. The value of any unit will vary
from Valuation Day to Valuation Day to reflect the investment performance of
the Available Division applicable to that Accumulation Unit.
The value of an Accumulation Unit in each Available Division is arbitrarily
set at $1.00 on the first Valuation Day for that Available Division. The
value of any Accumulation Unit on any subsequent Valuation Day is equal to
its value on the preceding Valuation Day multiplied by that
-22-
<PAGE>
<PAGE>
Available Division's Net Investment Factor for the Valuation Period. The Net
Investment Factor for an Available Division for a Valuation Period equals the
"gross investment rate" for such period plus one and minus the Mortality and
Expense Risk Charge for that Valuation Period.
The "gross investment rate" of an Available Division for any Valuation Period
is equal to the net earnings of that Available Division during the Valuation
Period, divided by the value of the total assets of that Available Division
at the beginning of the Valuation Period. The net earnings of each Available
Division during a Valuation Period are equal to the accrued investment income
and capital gains and losses (realized and unrealized) of that Available
Division, reduced by any amount charged against that Available Division for
premium taxes or other governmental charges paid or reserved by SELIC during
that Valuation Period.
The "gross investment rate" and net earnings of each Available Division will
be determined by SELIC in accordance with generally accepted accounting
principles and applicable laws, rules and regulations.
Transactions which require the crediting and canceling of Accumulation Units
will be processed as of the Valuation Time on the Valuation Day in which the
transaction is effected. Premium payments, and requests for Contract Loans,
withdrawals, transfers, or any other transaction, received in proper form
before the Valuation Time on a Valuation Day will be effected as of the
Valuation Time on the day that the Premium payment, or transaction request,
is received. Premium payments, and transaction requests, received in proper
form after the Valuation Time on a Valuation Day, will be effected as of the
Valuation Time of the following Valuation Day.
The Insurance Account Value in the Money Market Division on the Issue Date is
equal to the Premium paid on that date, less any applicable Premium Load
less:
(1) Cost of Insurance Charges;
(2) Administration Charges;
(3) Any charges that are deducted from the Insurance Account Value for
benefits provided by Contract riders;
(4) Underwriting Charges, if any; and
(5) Charges for Special Insurance Class Rating, if any.
The Insurance Account Value in each Available Division as of the Valuation
Time on any subsequent Valuation Day is equal to the Insurance Account Value
in that Available Division on the prior Valuation Day plus:
(1) Any new Net Premium allocated to that Available Division;
-23-
<PAGE>
<PAGE>
(2) Any amounts transferred to that Available Division from another
Available Division, the Fixed Fund or the Borrowed Fund; and
(3) Any increase in value of the Available Division's investments due to
investment results net of Daily Charges;
and less:
(1) Any amounts transferred from that Available Division to another
Available Division, the Fixed Fund or the Borrowed Fund;
(2) Any decrease in the value of the Available Division's investments due
to investment results net of Daily Charges;
(3) The Cost of Insurance Charges allocated to that Available Division
(deducted only on a Monthiversary);
(4) The Administration Charges allocated to that Available Division
(deducted only on a Monthiversary);
(5) Any partial withdrawals taken from such Contract and allocated to that
Available Division;
(6) Any charges allocated to that Available Division that are deducted from
the Insurance Account Value for benefits provided by Contract
riders;
(7) Any Underwriting Charges allocated to that Available Division;
(8) Any charges for Special Insurance Class Rating allocated to that
Available Division (deducted only on a Monthiversary); and
(9) Any other charges allocated to that Available Division as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
For description of the Insurance Account Value in the Fixed Fund and the
Borrowed Fund, see "The Contract -- The Fixed Fund" and "Contract Loan
Privilege."
-24-
<PAGE>
<PAGE>
Transfers
The Contract provides that all or part of the Insurance Account Value (except
amounts in the Borrowed Fund) may be transferred between or among Available
Divisions and the Fixed Fund on any Valuation Day subject to the following
limitations:
(a) The Insurance Account Value cannot be allocated to more than five
Available Divisions and the Fixed Fund at any one time;
(b) Transfer requests must be in writing and in a form acceptable to SELIC;
(c) Except as described below, only one transfer is permitted in each
Contract Year;
(d) SELIC reserves the right to limit the amount of any transfer.
Transfers from or among the Available Divisions must be in amounts
of at least $500, or, if smaller, the Insurance Account Value in
an Available Division; and
(e) Transfers to the Fixed Fund may be limited. Insurance Account Value in
the Fixed Fund after any transfer to the Fixed Fund may be no
greater than the amount specified in the Contract. (See "The
Fixed Fund -- Allocation of Amounts to the Fixed Fund").
Transfers from the Fixed Fund are also subject to the following limitations:
(a) The transfer must be made in the 30 day period following a Contract
Anniversary; and
(b) The amount transferred may be no larger than 25% of the Insurance
Account Value in the Fixed Fund on the date of the transfer.
Transfers may be requested by dollar amount or whole percentage. SELIC will
execute a transfer only upon receipt of a properly executed transfer request.
Written confirmation of each transfer will be sent to the Contract Holder.
Notwithstanding the above limitations, which are set forth in the Contract,
SELIC will, as a matter of administrative practice, allow up to 12 transfers
per year between or among Available Divisions. Contract Holders will be
notified in advance if this administrative practice is changed or eliminated.
For purposes of calculating the number of transfers requested in any Contract
Year, all transfer requests received on the same Valuation Day will be
counted as one transfer request. Transfers effected in connection with
Contract Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers permitted in each Contract Year.
Contract Loan Privilege
The Contract Holder may request a loan against the Contract. The Contract
must be assigned to the Company as the sole security for the Contract Loan.
A Contract Loan may take place on any Valuation Day. An amount equal to the
amount borrowed will be transferred from the Separate
-25-
<PAGE>
<PAGE>
Account and the Fixed Fund to the Borrowed Fund. The Borrowed Fund
is a portion of SELIC's General Account reserved for amounts held as
collateral for Contract Loans. A Contract Loan from, or secured by,
the Contract may have federal income tax consequences. In particular,
if the Contract is a "modified endowment contract" loans may be currently
taxable and subject to a 10% penalty tax. (See "Federal Income Tax
Considerations").
Source of Contract Loan: Insurance Account Value equal to each Contract Loan
will be transferred to the Borrowed Fund, reducing the Insurance Account
Value in the Separate Account and the Fixed Fund. Unless other specific
instructions are received from the Contract Holder, the Contract Loan will be
taken from the Available Divisions of the Separate Account and the Fixed Fund
in proportion to the amount of the Contract Holder's then current Insurance
Account Value in each Available Division of the Separate Account and Fixed
Fund.
The maximum total of Contract Loans for each Contract is equal to the
Insurance Account Value less the sum of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with interest accrued but
unpaid; and
(3) Contract Loan interest charges until the next Contract Anniversary.
If a Contract Loan is requested that would cause this maximum to be exceeded,
SELIC will not process the request.
Contract Loan Interest: Contract Loan interest accrues daily and is due on
each Contract Anniversary. If it is not paid when due, the Contract Loan
interest will be added to the Contract Loan and, as part of the Contract
Loan, will bear the same interest rate. Any Contract Loan interest
capitalized on a Contract Anniversary will be treated as if it was a new
Contract Loan and will be transferred from the Available Division of the
Separate Account and Fixed Fund in proportion to the Insurance Account Value
therein.
A fixed Contract Loan interest rate option or a variable Contract Loan
interest rate option may be elected. This option may be changed by the
Contract Holder on any Contract Anniversary. Written notice of the change
must be received at SELIC's Home Office no more than 90 days nor less than 30
days prior to such Contract Anniversary. The Contract Loan interest rate
options are as follows:
Fixed Contract Loan Interest Rate. If a Fixed Contract Loan Interest Rate
- ----------------------------------
option is selected and a Contract Loan is outstanding, a fixed Contract Loan
interest rate of 6.00% will be assessed annually in arrears on the Contract
Anniversary.
Variable Contract Loan Interest Rate. On each Contract Anniversary, SELIC
- -------------------------------------
will declare the Variable Contract Loan Interest Rate that will apply to
outstanding Contract Loans for the next Contract Year. This rate will equal
the higher of a) or b), where a) is the Monthly Average of the
-26-
<PAGE>
<PAGE>
Composite Yield on Corporate Bonds as published by Moody's Investor Service,
Inc. (or, if it is no longer published, a substantially similar average) for
the calendar month ending two months before the Contract Year begins, and b)
is 4.50%. If the rate calculated according to this formula is not at least
.50% higher than the rate in effect for the previous year, SELIC will not
increase the rate. If the rate calculated is at least .50% lower than the
rate in effect for the previous year, SELIC will decrease the rate.
If the Variable Contract Loan Interest Rate option is selected, SELIC will
inform the Contract Holder of the current Variable Contract Loan Interest
Rate at the time a Contract Loan is made. The current Variable Contract
Loan Interest Rate can be changed by SELIC on any Contract Anniversary,
but the rate will never exceed the maximum Contract Loan interest rate
permitted by the law of the Governing Jurisdiction.
Interest on Borrowed Fund: Interest will be credited to amounts held in the
Borrowed Fund as collateral for Contract Loans. This rate of interest
credited on the Borrowed Fund will be at least equal to an annual effective
rate of 4.00%.
For the Fixed Contract Loan Interest Rate option, the rate of interest
credited on the Borrowed Fund is currently set equal to 5.65%. If a Variable
Contract Loan Interest Rate option is chosen, SELIC currently anticipates
that the rate of interest credited on the Borrowed Fund will equal the
Variable Contract Loan Interest Rate less a "loan interest spread" of .35%.
This "loan interest spread" is guaranteed never to exceed .50%. The Borrowed
Fund crediting rate may not be changed more frequently than annually. Any
change in the Borrowed Fund crediting rate for the Contract will be effective
on a Contract Anniversary. The Contract Holder will be notified in advance
of any such change.
Interest credited to the Borrowed Fund will be transferred to the Available
Divisions of the Separate Account and Fixed Fund on each Contract
Anniversary. The amount so transferred will be allocated among the Available
Divisions of the Separate Accounts and Fixed Fund in proportion to the
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
If Contract Loan interest due for the previous Contract Year has not been
paid when due, then on the Contract Anniversary, the Insurance Account Value
attributable to the Separate Account and Fixed Fund will be reduced by the
difference between the Contract Loan interest due and unpaid for the previous
Contract Year, and the interest credited to the Borrowed Fund during the
previous Contract Year.
On any given day the Insurance Account Value in the Borrowed Fund will be
equal to the Insurance Account Value in the Borrowed Fund on the previous day
plus:
(1) Any new amounts transferred to the Borrowed Fund from the Separate
Account and Fixed Fund due to new Contract Loans and/or capitalized
Contract Loan Interest; and
(2) Any interest credited to the Borrowed Fund.
-27-
<PAGE>
<PAGE>
and less:
(1) Any amounts transferred from the Borrowed Fund to the Separate Account
and/or Fixed Fund due to Contract Loan repayments or the transfer
of interest credited to the Borrowed Fund on a Contract
Anniversary.
Repayment: All funds received by SELIC will be credited to the Contract as
Premiums unless clearly designated as a Contract Loan repayment by the
Contract Holder.
All or part of the Contract Loan plus accrued Contract Loan interest may be
repaid at any time while the Contract is in force.
Any repayment of a Contract Loan will result in the transfer of values equal
to the repayment out of the Borrowed Fund and the application of those values
to the Available Divisions of the Separate Account and Fixed Fund. Unless
other specific instructions are received from the Contract Holder, these
values will be applied to the Separate Account's Available Divisions and the
Fixed Fund in proportion to the amount of the Contract Holder's then current
Insurance Account Value in each Available Division of the Separate Account
and Fixed Fund.
Surrender and Partial Withdrawals
At any time during the lifetime of the Insured and while the Contract is in
force, the Contract may be surrendered for its Net Cash Value on any
Valuation Date. The Contract Holder must request a surrender in writing and
in a form acceptable to SELIC. On surrender, SELIC will pay to the Contract
Holder in a single sum the Contract's Net Cash Value as of the Valuation Day
during which a proper surrender request is received. A Contract's Net Cash
Value is the Insurance Account Value less any outstanding Contract Loan and
accrued and unpaid Contract Loan interest. If a proper surrender request is
received on a Monthiversary, then Monthly Charges will not be deducted on
that Monthiversary. A surrender may have Federal income tax consequences.
(See "Federal Income Tax Considerations"). Once the Contract is surrendered,
SELIC's obligations under the Contract will cease. (See "Termination").
The Contract Holder may also request partial withdrawals of Net Cash Value
from one or more Available Divisions and the Fixed Fund. The withdrawal must
be requested by the Contract Holder in writing on a form acceptable to SELIC.
Unless other specific instructions are received from the Contract Holder, the
withdrawal will be taken from each Available Division and the Fixed Fund in
proportion to the Contract Holder's then current Insurance Account Value in
each Available Division and the Fixed Fund. (See "The Fixed Fund").
Surrender and partial withdrawal proceeds will generally be paid to the
Contract Holder within seven days. (See "Additional Provisions of the
Contract -- Availability of Funds" and "The Fixed Fund").
-28-
<PAGE>
<PAGE>
The Contract Holder may withdraw any amount of at least $1,000 per withdrawal
and up to the Contract's maximum withdrawal amount. The maximum withdrawal
amount for the Contract is equal to the Insurance Account Value less the sum
of the following:
(1) The Minimum Net Premium for the current Contract Year;
(2) The outstanding Contract Loan amount together with the unpaid accrued
Contract Loan interest on the Contract Loan amount; and
(3) Contract Loan interest on the Contract Loan amount until the next
Contract Anniversary.
Partial withdrawals may increase the Net Amount at Risk, resulting in higher
Cost of Insurance Charges under the Contract.
The Death Benefit and Face Amount may be adjusted at the time a partial
withdrawal is taken, based on the amount withdrawn, the Death Benefit Option
then in effect for the Contract, and the Insurance Account Value. If the
Face Amount is reduced, the reduction in Face Amount for Death Benefit Option
1 or Death Benefit Option 3 will be equal to the amount of the withdrawal.
The Total Insurance Coverage remaining after the partial withdrawal may not
be less than the Minimum Insurance Coverage. A partial withdrawal request
that would reduce the Total Insurance Coverage below this minimum will not be
effected. If the Face Amount reflects previous Face Amount increases at the
time of a partial withdrawal which causes a reduction in Face Amount, then
partial withdrawals will be applied first to reduce the Initial Face Amount,
and then to each Face Amount increase in order, starting with the first
increase.
A partial withdrawal that decreases the Face Amount of the Contract will
result in a recalculation of the Target Premium, and generally will decrease
the Target Premium for future Contract Years.
A partial withdrawal may have Federal income tax consequences. (See "Federal
Income Tax Considerations".)
Split Dollar Exception: Notwithstanding the above limitations, SELIC will,
as a matter of administrative practice, at the time of a split dollar
rollout, allow the owner of a Death Benefit Option 3 Contract, the option of
reducing the accumulated Premiums before reducing the Face Amount. If the
withdrawal is greater than the accumulated Premiums, a reduction in Face
Amount will occur for the amount in excess of the accumulated Premiums.
This exception applies to Policies issued pursuant to an employer-sponsored
benefit plan, with premiums paid at least in part by the employer.
Death Benefits Under the Contract
If the Insured dies while the Contract is in force, a Death Benefit is
payable to the Beneficiary when SELIC receives due proof of death and any
other requirements are satisfied. The amount of the Death Benefit payable
depends on the Death Benefit Option selected for the Contract by the Contract
Holder and in effect on the date of death of the Insured, and is adjusted for
outstanding Contract Loans and unpaid charges. (See "Payment of Death
Benefits"). The
-29-
<PAGE>
<PAGE>
amount of the Death Benefit will be determined at the end of the Valuation
Period during which the Insured's death occurred. The Death Benefit will be
paid to the surviving Beneficiary or Beneficiaries specified in the
Application or as subsequently changed. The Death Benefit under each
Death Benefit Option will never be less than the Contract's Face Amount as
long as the Contract remains in force. For modifications to this Section for
Joint Insureds, see Appendix B -- "Joint and Last Survivor Rider."
Death Benefit Options: The Contract Holder may select one of the following
Death Benefit Options:
Option 1: The Face Amount in effect at the date of death
Option 2: The Face Amount plus the Insurance Account Value in effect at the
date of death; or
Option 3: The Face Amount in effect at the date of death, plus the
accumulated Premiums paid under the Contract up to the date of
death. In calculating the Death Benefit under this option,
the Premiums are accumulated from the date such Premiums were
credited to the Insurance Account Value to the date of death,
at a rate equal to the Death Benefit Option Accumulation Rate
shown in the Contract. This rate, which is selected by the
Contract Holder and subject to approval by SELIC, may be as
low as 0%, and does not have a maximum cap. A higher Death
Benefit Option Accumulation Rate will result in higher Cost of
Insurance Charges under a Contract.
To ensure that the Contract will qualify as life insurance under the Internal
Revenue Code, the Total Insurance Coverage will never be less than the
Minimum Death Benefit. The Minimum Death Benefit is equal to the Insurance
Account Value on the date of death multiplied by the appropriate Minimum
Death Benefit Factor as set forth in the Contract. Currently SELIC
calculates the Minimum Death Benefit Factor in accordance with Section
7702(a)(1) of the Internal Revenue Code ("The Cash Value Accumulation Test").
In the future SELIC may offer Contracts that will use Minimum Death Benefit
Factors and Premium limitations calculated in accordance with Section
7702(a)(2) of the Internal Revenue Code ("The Guideline Premium Test").
Once a Contract is issued complying with either "The Cash Value Accumulation
Test" or "The Guideline Premium Test" that test and the Minimum Death Benefit
Factors will be employed throughout the life of the Contract.
-30-
<PAGE>
<PAGE>
A table of representative Minimum Death Benefit Factors follows:
<TABLE>
=========================================================================
MINIMUM DEATH BENEFIT FACTORS
- --------------------------------------------------------------------------
<CAPTION>
Unisex
Age Unismoke
=========================================================================
<S> <C>
25 5.79
30 4.93
35 4.18
40 3.55
45 3.03
50 2.60
55 2.25
60 1.97
65 1.74
70 1.56
=========================================================================
</TABLE>
Under Death Benefit Option 1 and Death Benefit Option 3, positive investment
performance (if any) will be reflected in Insurance Account Value, but not in
the Death Benefit, unless the Death Benefit equals the Minimum Death Benefit.
Under Death Benefit Option 2, the amount of Death Benefit will always vary as
the Insurance Account Value varies, but will never be less than the Face
Amount. In general, if Death Benefit Option 2 is selected, positive
investment performance (if any) will be reflected in the Death Benefit.
Subject to certain limitations, the Contract Holder may change the Death
Benefit Option for the Contract while the Contract is in effect by notifying
SELIC in writing. If SELIC approves the change, it will take effect on the
next Contract Anniversary that is at least 30 days after all the required
information has been provided to SELIC. The Cost of Insurance Charges for
the Contract will be adjusted to provide for the change. No such change will
be effective if the Insured dies before the effective date of the change.
Changing the Contract's Death Benefit Option may result in either an increase
or decrease in the Face Amount. If the Face Amount increases, SELIC may
require satisfactory evidence of insurability. If the Face Amount decreases,
the order in which the Face Amount is reduced is assessed in the same manner
as a decrease in Face Amount (See "Face Amount"). Any change in the Death
Benefit Option will not be effected if it would result in Total Insurance
Coverage that is less than the Minimum Insurance Coverage of the Contract.
SELIC also reserves the right not to effect a requested change in Face Amount
if the change would result in the Contract not satisfying the requirements
of the Internal Revenue Code of 1986, as amended.
A change in the Death Benefit Option will not result in an immediate change
in the amount of a Contract's Death Benefit or Insurance Account Value. If a
Contract is changed from Death Benefit Option 1 to Death Benefit Option 2,
then the Face Amount will equal the Face Amount
-31-
<PAGE>
<PAGE>
prior to the change less the Insurance Account Value on the effective date
of the change. If a Contract is changed from Death Benefit Option 3 to
Death Benefit Option 2, then the Face Amount will equal the Face Amount
prior to the change plus the accumulated Premiums less the Insurance Account
Value on the effective date of the change. If a Contract is changed from
Option 2 or Option 3 to Option 1, then the Face Amount will equal the Death
Benefit on the effective date of the change. SELIC may require satisfactory
evidence of insurability if the Contract is changed from Option 2 or Option
3 to Option 1. If a Contract is changed from Option 1 to Option 3, then
the Face Amount will equal the Face Amount prior to the change less the
accumulated Premiums on the effective date of change. If a Contract is
changed from Option 2 to Option 3, then the Face Amount will equal the
Death Benefit less the accumulated Premiums on the effective date of the
change.
A change in Death Benefit Option may affect monthly Cost of Insurance
Charges, because the amount of this charge varies with a Contract's Net
Amount at Risk. Assuming the Death Benefit is not equal to the Minimum Death
Benefit, changing from Option 2 or Option 3 to Option 1 will generally
decrease Net Amount at Risk, and therefore decrease Cost of Insurance
Charges, on Monthiversaries following the effective date of the change.
Changing from Option 1 or Option 3 to Option 2 will generally result in a Net
Amount at Risk that remains level; however, under Option 2, Cost of Insurance
Charges will increase over time, because cost of insurance rates generally
increase with the age of the Insured. Finally a change from Option 1 or
Option 2 to Option 3 will result in a Net Amount at Risk that will vary based
upon the frequency and amount of Premium payments, as well as the rate at
which the Premiums are accumulated. Under Option 3, more frequent and higher
premium payments as well as a higher Death Benefit Option Accumulation Rate
generally will result in a higher Net Amount at Risk, and therefore higher
Cost of Insurance Charges.
Face Amount: The Minimum Face Amount under a Contract is $10,000. The
minimum Total Insurance Coverage is $25,000. The Initial Face Amount and
Supplemental Term Insurance Amount will be set forth in the Application. The
Contract Holder may, subject to approval of SELIC, change the Face Amount.
The Contract Holder must request the change by notifying SELIC in writing,
and SELIC reserves the right to require satisfactory evidence of
insurability, which may include a medical examination. If SELIC approves the
change, it will take effect on the next Contract Anniversary which is at
least 30 days after all the required information has been provided to SELIC.
A partial withdrawal may also reduce the Face Amount under a Contract.
(See "The Contract -- Surrender and Partial Withdrawals"). Decreases in Face
Amount cannot reduce the Total Insurance Coverage to less than the Minimum
Insurance Coverage. No such change will be effective if the Insured dies
before the date of such change. SELIC reserves the right not to effect a
requested change in Face Amount if the change would result in the Contract
not satisfying the requirements of the Internal Revenue Code of 1986, as
amended. The Net Cash Value immediately following the increase in Face
Amount must be sufficient to cover Monthly Charges to be deducted on the
next Monthiversary. If Net Cash Value will not be sufficient, an additional
Premium will be necessary before the increase in Face Amount will be effected.
-32-
<PAGE>
<PAGE>
If the Face Amount is decreased, and the Contract's Face Amount before the
change in Death Benefit Option reflects previous Face Amount increases, then
the Face Amount reduction will result first in the reduction of the Face
Amount provided by the most recent increase, then the next most recent
increase successively, and finally the Initial Face Amount.
A decrease in the Face Amount of the Contract will also result in a
recalculation of the Target Premium, and generally will decrease the Target
Premium for future Contract Years.
Additional insurance coverage may be available under one or more riders to
the Contract, including a Supplemental Term Insurance Rider. (See Appendix B
- -- "Supplemental Term Insurance Rider".) Under certain circumstances, SELIC
may offer Contracts through which insurance coverage is provided primarily
through the Supplemental Term Insurance Rider. Because insurance coverage
under such riders may be purchased through deductions from Available
Divisions and/or the Fixed Fund that are not taken into account in
determining Target Premium, there may not be additional Premium Load
associated with this coverage. There may be circumstances in which it will
be to the Contract Holder's economic advantage to include a significant
portion or percentage of coverage under the Supplemental Term Insurance
Rider. These circumstances depend on many factors, including the Premium
levels and amount and duration of coverage, as well as the age (and, where
applicable, sex, smoker status, and/or risk classification) of the Insured.
As discussed above, SELIC reserves the right to refund promptly certain
Premium amounts paid during the first Contract Year in excess of Planned
Renewal Premium amounts. (See "The Contract -- Premiums"). In such cases,
SELIC will generally agree to accept such Premium amounts provided that the
Contract Holder elects to convert a portion of the Face Amount, as determined
by SELIC, to coverage under a Supplemental Term Insurance Rider. Contract
Holders should contact their agent for additional information.
A change in Face Amount may have Federal income tax consequences. (See
"Federal Income Tax Considerations").
Payment of Death Benefit: The amount of any Death Benefit payable is
adjusted as follows:
(1) By deducting the amount of any unpaid Monthly Charges against the
Insurance Account Value to the date of death (See "Charges and
Deductions");
(2) By deducting the amount of any Contract Loans outstanding against the
Insurance Account Value on the date of death plus accrued but
unpaid interest on such Contract Loans on the date of death (See
"The Contract -- Contract Loan Privilege"); and
(3) By deducting the amount of any unpaid charges provided by rider.
The Death Benefit will usually be paid in a lump sum within seven days of the
date due proof of the Insured's death is received by SELIC at its Home Office
and any other requirements are satisfied. Payment of any amount of Death
Benefit based upon the Separate Account may be delayed, however, during any
period that:
-33-
<PAGE>
<PAGE>
(1) The New York Stock Exchange (or its successor) is closed, except for
normal weekend or holiday closings, or trading is restricted; or
(2) The SEC determines that a state of emergency exists.
Settlement of any amounts not based upon the Separate Account will be made
not more than six months after due proof of death is received. Interest on
Death Benefits will be credited as prescribed by law. Payment of a Death
Benefit may be deferred by a separate written agreement between SELIC and the
Contract Holder or Beneficiary, subject to SELIC's approval. In such cases,
the interest that will be credited will be at least 1.00% per annum.
Beneficiary: The Contract Holder may name or change the Beneficiary by
sending written notice to SELIC. A Beneficiary may be revocable or
irrevocable. An irrevocable Beneficiary may not be changed without his or her
consent, and consent is also required prior to the Contract Holder's exercise
of certain other rights. There may be different classes of Beneficiaries,
such as primary and secondary. These classes set the order of payments.
There may be more than one Beneficiary in a class. The Beneficiary
designation in effect on the Issue Date is stated in the Contract Application
and in any related documents which are attached to and made a part of the
Contract.
CHARGES AND DEDUCTIONS
Certain charges will be deducted by SELIC from Premiums and from Insurance
Account Value as compensation for providing the insurance benefits under the
Contract, for administering the Contract, for assuming certain risks, and for
incurring certain expenses in distributing the Contract. A prospective
purchaser may request personalized hypothetical illustrations of the
Contract's Insurance Account Value and Death Benefits. Such hypothetical
illustrations will reflect the effect of the charges and deductions under the
Contract and may assist a prospective purchaser in understanding the
operation of the Contract.
Premium Load
Before crediting a Premium to the Available Divisions and/or the Fixed Fund,
a Premium Load, consisting of a Distribution Charge, a Federal Tax charge and a
Premium Tax Charge, is deducted from that Premium. Premium Load is expressed
as a percentage of Premium; the percentage depends upon whether the Premium
is Target Premium or Excess Premium, on the Contract Year during which the
Premium is paid, and on the Issue Age of the Insured.
Distribution Charge: The Distribution Charge, which is a sales load, is
comprised of a Premium Expense Load and a Commission Charge.
The Premium Expense Load will be deducted from each Premium and will equal a
percentage of the Premium. The percentage will be determined based on the
sum of the Initial Premiums for all Contracts in a Case, in accordance with
the following table:
-34-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Sum of the Initial Premiums
of All Contracts in the Case Premium Expense Load
---------------------------- --------------------
<S> <C>
Less than $250,000 2.00%
$250,000 - $999,999 1.50%
$1,000,000 and more 1.25%
</TABLE>
A Commission Charge will be deducted from Premiums paid in each Contract Year
up to the Target Premium amount. There is no Commission Charge on any Excess
Premium amount paid during a Contract Year. The Commission Charge on
Premiums paid in a Contract Year up to the Target Premium amount is based
upon the Issue Age of the Insured and the Contract Year as follows:
<TABLE>
Commission Charges During Contract Year
---------------------------------------
<CAPTION>
Commission Charge
---------------------------------------------------
For Contract Year Contract Years Contract Years
Issue Ages 1 2-10 11-15
- ---------- - ---- -----
<S> <C> <C> <C>
20 - 51 28.00% 8.00% 6.00%
52 - 59 28.00% 6.33% 4.00%
60 - 67 28.00% 4.66% 4.00%
68 - 80 19.00% 4.00% 4.00%
81 - 85 13.00% 4.00% 4.00%
</TABLE>
For all Issue Ages the Commission Charge will be 2.00% for Year 16 and
thereafter.
For Single Premium Payments, the maximum Commission Charge will be 6.00% of
Premium paid. Single Premium Payments are the excess of the Premium received
in the first Contract Year over Planned Renewal Premium. Failure to pay
Planned Renewal Premium will not automatically result in lapse of the
Contract.
The Distribution Charge is intended to compensate SELIC for its expenses in
the distribution of the Contracts, including sales commissions, printing
prospectuses, preparing sales literature and paying for other promotional
activities. To the extent that those expenses are not recovered from the
Distribution Charge, those expenses may be recovered from other sources,
including profit, if any, the mortality and expense risk charge and mortality
gains. In accordance with applicable SEC regulations, Distribution Charge
amounts will not exceed nine percent of the sum of the "guideline annual
premiums" that would be paid during the period equal to the lesser of 20
years or the anticipated life expectancy of the Insured based on the 1980
Commissioners Standard Ordinary Mortality Table, as defined in such
regulations.
-35-
<PAGE>
<PAGE>
For modifications to this section for Joint Insureds, see Appendix B --
"Joint and Last Survivor Rider." For modifications to this section with the
addition of a Term Rider, see Appendix B -- "Supplemental Term Rider
Insurance."
Premium Tax Charge: SELIC also deducts from each Premium a Premium Tax
Charge approximately equal to the taxes that are based on such Premium
received under the Contract and that are imposed on SELIC by the state in
which the Contract Holder resides or by the state in which the Insured
resides. In general, for Cases with one Contract Holder and with less than
500 Contracts, this charge will be determined as to any Contract in
accordance with the law of the state in which the Contract Holder resides.
For Cases with a greater number of Insureds and one Contract Holder, the
amount of the charge as to any Contract will be determined in accordance with
the law of the state in which the Insured resides. State premium tax rates
currently range from .75% to 5.00%.
Federal Tax Charge: SELIC also deducts from each Premium a charge for federal
income taxes, equal to 1.00%, which compensates SELIC for an increased
federal tax burden resulting from the receipt of Premiums under Section 848
of the Internal Revenue Code. This charge for federal income taxes is
reasonable in relation to SELIC's federal tax burden under Section 848
resulting from the receipt of Premiums under the Contracts.
Daily Charges
Mortality and Expense Risk Charge: Each Division of the Separate Account is
assessed a Mortality and Expense Risk Charge, which will never exceed an
annual effective rate of 0.50% of the Contract's Separate Account Value
attributable to that Division. Currently, the amount of this charge is an
annual effective rate of 0.35% of the Separate Account Value, which is
equivalent to 0.000957233% of the Separate Account Value attributable to the
Division on a daily basis.
The charge, which is designed to compensate SELIC for the mortality and
expense risks it assumes under the Contract, is deducted on a daily basis
from the Separate Account's assets.
The mortality risk assumed by SELIC under the Contract is that Insureds may,
on average, live for shorter periods of time than estimated and therefore
that the Cost of Insurance Charges specified in the Contract will be
insufficient to meet actual claims. The expense risk assumed by SELIC under
the Contract is the risk that other expenses of issuing and administering the
Contract and operating the Separate Account will be greater than the charges
imposed under the Contract to cover such expenses. If the money collected
from the Mortality and Expense Risk Charge is not needed to cover these
risks, it will be SELIC's gain and will be used for any proper purpose.
Conversely, if the money collected is insufficient to cover these risks,
SELIC will absorb any loss.
-36-
<PAGE>
<PAGE>
Monthly Charges
As of the Contract Date and on each Monthiversary thereafter, Monthly Charges
will be deducted from each Available Division and the Fixed Fund. Monthly
Charges consist of the Administration Charge, the Cost of Insurance Charge,
charges for additional benefits provided by Contract rider, and charges for
Special Insurance Class Rating, if any. These charges will be deducted from
each Available Division and the Fixed Fund in proportion to the Insurance
Account Value attributable to each Available Division and the Fixed Fund.
Administration Charge: On each Monthiversary, a charge is deducted to
compensate SELIC for administrative expenses. The current amount of this
charge is $4.50 per month per Contract. This charge may change, but is
guaranteed not to exceed $8.00 per month per Contract. The Administration
Charge is assessed to reimburse SELIC for the expenses associated with the
administration and maintenance of the Contract and the Separate Account.
SELIC does not expect to profit from this charge.
Cost of Insurance Charge: A deduction for SELIC's cost of insurance
protection is made on each Monthiversary and, unless otherwise specified by
the Contract Holder, will be based on unisex and unismoke rates. The cost of
insurance rates generally increase as the Insured's Attained Age increases.
SELIC also offers rates, upon a Contract Holder's request, that vary based on
the sex (except Contracts sold in Montana; See "Unisex Requirements Under
Montana Law") and smoker class of the Insured. However, any variation by sex
and/or smoker class must be applied on a consistent basis for all Contracts
in the applicable Case.
The Cost of Insurance Charge is determined by multiplying the applicable cost
of insurance rate by the Net Amount at Risk each Contract Month. Any change
in the Net Amount at Risk will affect the total Cost of Insurance Charges
deducted from the applicable Insurance Account Value. Since the Net Amount at
Risk may not be constant, the charge could vary monthly.
The guaranteed cost of insurance rates will not be greater than the
guaranteed maximum cost of insurance rates set forth in the Contract. Those
rates, as well as the rates used for Federal income tax purposes, are based
on the 1980 Commissioners Standard Ordinary (CSO) Mortality Tables, Age
Nearest Birthday that correspond to the applicable sex and smoker blend under
the Contract. Current Cost of Insurance Charges may be lower and may be
changed. The current Cost of Insurance Charges for the Contract Year are
shown in the Contract Holder's annual statement.
SELIC may offer insurance coverage up to $1 million on a guaranteed issue
(no medical underwriting required) or simplified issue (limited medical
underwriting) basis under Contracts that meet all the following requirements:
1) The Case to which the Contract belongs has at least 25 Insureds;
2) Each Insured under the Contracts in the applicable Case must at the
time of issue be actively at work for a common Employer for a
minimum of 1,000 hours annually;
3) 100% of "eligible persons," defined in a manner acceptable to SELIC,
must be named as an Insured under the applicable Case;
-37-
<PAGE>
<PAGE>
4) The Face Amount, and any Supplemental Term Insurance Amount, for each
Contract in the applicable Case must be determined in all years by
a formula acceptable to SELIC;
5) The Face Amount increases, including any increases in Supplemental Term
Insurance Amount, in any given year for any Contract in the
applicable Case cannot exceed 10% and the cumulative increase in
any Face Amount cannot exceed the smaller of the initial Total
Insurance Coverage or $1,000,000;
6) The Contract Holder, Insured and Beneficiary of each Contract in the
applicable Case must be either an entity domiciled in the United
States or a United States citizen; and
7) The Insured under each Contract in the applicable Case must be between
the ages of 20 and 65.
For Simplified Issue Contracts, SELIC requires that certain medical
information regarding the prospective Insured be provided in the Application.
SELIC will also offer Contracts on a medically underwritten basis. In these
situations, the rating of an Insured will affect the cost of insurance rates.
SELIC will offer medically underwritten Contracts on a standard and
substandard rating basis. Standard rates will, in general, be less than
substandard rates.
For Contracts with applications dated prior to April 29, 1996 and issued on a
guaranteed issue or simplified issue basis, the Cost of Insurance Charges
will vary only by the Attained Age of the Insured. For Contracts with
applications dated on or after April 29, 1996 and issued on a guaranteed
issue basis, the Cost of Insurance Charges will vary only by the Attained Age
of the Insured but for Contracts issued on a simplified issue basis the Cost
of Insurance Charges will vary by the Issue Age and the number of completed
Contract Years under the Contract. For all Contracts issued on a medically
underwritten basis the Cost of Insurance Charges will vary by the Issue Age
and the number of Completed Contract Years under the Contract. In general,
cost of insurance rates under Contracts that are issued on a guaranteed issue
basis will be greater than cost of insurance rates on Contracts issued on a
simplified issue basis, which will be greater than cost of insurance rates on
Contracts that are issued on a standard medically underwritten basis.
SELIC may require medical underwriting for any transaction that increases its
Net Amount at Risk. If any medical underwriting has taken place, an
Insured's rate class may affect the guaranteed and current cost of insurance
rate applicable to that Insured, but not the cost of insurance rate
applicable for Federal income tax purposes which for all Contracts will be
equal to 100% of the applicable 1980 CSO table.
Each Insured is placed in a rate class when SELIC issues a Contract, based on
the Case to which the Contract belongs and underwriting information,
including medical underwriting, if any. When an increase in Face Amount is
requested, SELIC reserves the right: (i) to accept or reject the request,
with or without obtaining additional underwriting information; and (ii) to
obtain additional underwriting information, including medical underwriting,
before approving the
-38-
<PAGE>
<PAGE>
increase to determine whether a different rate class would apply to the
increase. If the Insured's rate class at the time of the increase has
declined since the last change in coverage, and SELIC approves the change
in coverage, then the lower rate class will be applied to the Face
Amount increase only. If the Insured's rate class at the time of the
increase has improved since the last change in coverage, then the improved
rate class will be applied to the Total Insurance Coverage provided under the
Policy.
Additional Insurance Benefits and Special Insurance Class Ratings: Subject
to certain requirements, one or more riders may be added to a Contract.
These riders and the charges associated therewith are described in Appendix B
to this Prospectus. (See "Additional Provisions of the Contract -- Entire
Contract"). Deductions will be made on each Monthiversary for applicable
charges for any additional benefits provided by Contract rider.
Deductions will also be made on each Monthiversary for any applicable Special
Insurance Class Rating Charges, which are imposed under the Contract if a
Contract is issued on a substandard basis. These charges are set forth in
the Contract.
Underwriting Charges
An Underwriting Charge of up to $100 will be deducted from the Insurance
Account Value on the Issue Date if the Contract is issued on a medically
underwritten basis. Medically underwritten Contracts, for purposes of
deducting this charge, are all Contracts other than those issued on a
guaranteed issue or simplified issue basis (see "Charges and Deductions --
Monthly Charges -- Cost of Insurance Charges"). SELIC also reserves the
right to deduct an Underwriting Charge of up to $100 from the Contract's
Insurance Account Value on any Monthiversary following a Contract Month in
which medical underwriting has taken place due to an increase in SELIC's Net
Amount at Risk with respect to the Contract. The Underwriting Charge is
assessed to reimburse SELIC for the expenses associated with the
underwriting of the Contract. SELIC does not expect to profit from this
charge.
SELIC may, in its sole discretion, reduce or waive the Underwriting Charge in
connection with the purchase of Contracts sold by licensed agents of SELIC
that are also registered representatives of selected broker-dealers or
through banks that have entered into written sales agreements with Walnut
Street. Any reduction in or waiver of the Underwriting Charge is reflected
in the Contract.
The Underwriting Charge will be deducted from the Available Divisions and the
Fixed Fund in proportion to Insurance Account Value attributable to each
Division and the Fixed Fund.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
-39-
<PAGE>
<PAGE>
Annual Charges
On each Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund is: (i) reduced by Contract Loan interest due
and unpaid for the previous Contract Year; and (ii) increased by the interest
credited to the Borrowed Fund during the previous Contract Year. The net
result is that if Contract Loan interest is not paid when due, then on the
Contract Anniversary, the Insurance Account Value attributable to the
Separate Account and Fixed Fund will be reduced by the difference between the
Contract Loan interest due and unpaid for the previous Contract Year and the
interest credited to the Borrowed Fund during the previous Contract Year.
Other Charges
Taxes and Other Governmental Charges: SELIC does not currently make any
charges against the Divisions of the Separate Account for Federal, state or
local taxes attributable to them. However, SELIC may in the future impose
such a charge to provide for any tax liability of the Separate Account.
Fees and Expenses of Underlying Portfolios: The value of an Accumulation
Unit of each Separate Account Division that invests in shares or interests of
an Underlying Portfolio will reflect the expenses incurred by that Underlying
Portfolio. The Underlying Portfolio's expenses will include its investment
management fee and its operating expenses. The management fees and operating
expenses of each Underlying Portfolio are set forth in the accompanying
prospectus for such underlying Portfolio.
Illustrative Report Fee: At the Contract Holder's request, SELIC will
provide an illustrative report in addition to the reports it customarily
provides. Depending upon the type and complexity of the requested report,
SELIC may charge a reasonable fee not to exceed $50.00 per report. (See
"Records and Reports"). This fee must be paid by the Contract Holder
separately, and will not be considered a Premium payment.
TERMINATION
The Contract terminates on the earliest to occur of the following:
(1) The end of the Grace Period following any Monthiversary in which the
Net Cash Value for the Contract is insufficient to pay the Monthly
Charges (See "Termination for Insufficient Net Cash Value,"
below);
(2) The surrender of the Contract by the Contract Holder;
(3) The Maturity Date of the Contract; or
(4) The fulfillment of all of SELIC's obligations under the Contract.
-40-
<PAGE>
<PAGE>
Maturity Date
No insurance coverage will be effective on or after the Maturity Date, which
is the Contract Anniversary on which the Insured reaches Attained Age 100.
If the Insured is living and the Contract is in force on the Maturity Date,
the Net Cash Value will be paid to the Contract Holder, the Contract will
terminate, and the liability of SELIC under the Contract will cease.
For modifications to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
Termination for Insufficient Net Cash Value
A Contract will not terminate automatically for failure to pay a subsequent
Premium. However, if the Net Cash Value is not sufficient to cover the
Monthly Charges due with respect to a Contract on any Monthiversary, then the
Grace Period begins. This Grace Period begins on the Monthiversary on which
the Monthly Charges are due. The Grace Period ends 61 days from that
Monthiversary or, if later, 61 days after the date SELIC mails a written
notice to the Contract Holder at the last known address shown on SELIC's
records. This notice will state the Premium amount needed to keep the
Contract in force. During the Grace Period, the insurance coverage under the
Contract will continue in effect.
To continue the Contract's insurance coverage in force, the Contract Holder
must make a Premium payment before the Grace Period ends at least equal to
three times the Monthly Charges due when the Grace Period began, plus Premium
Load.
The Contract will terminate without value (and therefore the insurance
coverage will cease) at the end of the Grace Period if such amounts are not
paid.
Reinstatement of a Contract Terminated for Insufficient Value
A Contract that has terminated for insufficient Net Cash Value may be
reinstated within five years from the date of Contract termination. The
Contract Holder must request the reinstatement in a form acceptable to SELIC
and pay the reinstatement Premium, which must be at least equal to the
Monthly Charges due and unpaid at the time of lapse, plus three times the
Monthly Charges due at the time of reinstatement, plus any applicable Premium
Load. Medical evidence of insurability will be required for reinstatement,
and the Insured must be living on the date the reinstatement becomes
effective.
For Modification to this Section for Joint Insureds see Appendix B -- Joint
and Last Survivor Rider.
-41-
<PAGE>
<PAGE>
THE FIXED FUND
Amounts invested in the Fixed Fund become part of the general assets of SELIC
held in SELIC's General Account. SELIC invests the assets of the General
Account in accordance with applicable state insurance laws. Because of
exemptive and exclusionary provisions, interests in the General Account have
not been registered under the Securities Act of 1933, and the General Account
has not been registered as an investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the General Account. The disclosure regarding the
General Account may, however, be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
This Prospectus describes a flexible premium variable life insurance
contract. This Prospectus together with the accompanying prospectuses for the
Underlying Portfolios, is generally intended to serve as a disclosure
document only for the aspects of the Contract relating to the Separate
Account. For complete details regarding the Fixed Fund, see the Contract
itself.
General Description
The General Account consists of all assets owned by SELIC, other than those
in the Separate Account and other separate accounts. Subject to applicable
law, SELIC has sole discretion over the investment of the assets of the
General Account.
The allocation of amounts to the Fixed Fund does not entitle a Contract
Holder to share in the investment experience of the General Account. Instead,
SELIC guarantees that the Insurance Account Value in the Fixed Fund will
accrue interest at a rate of at least 4.00%, compounded annually, independent
of the actual investment experience of the General Account.
The Borrowed Fund is also part of the General Account. (See "The Contract --
Contract Loan Privilege").
Allocation of Amounts to the Fixed Fund
At Contract issue, SELIC will determine the maximum percentage of the
non-borrowed Insurance Account Value that may be allocated, either initially or
by transfer, to the Fixed Fund. This maximum percentage is set forth in the
Contract (the "maximum allocation percentage"). The ability to allocate Net
Premiums or to transfer Insurance Account Value to the Fixed Fund may not be
made available or may be limited in accordance with the terms of the
Contract. SELIC, from time to time, adjust the maximum allocation percentage.
Such adjustments may not be uniform to all Contracts. Subject to this
maximum, a Contract Holder may elect to allocate Net Premiums to the Fixed
Fund, the Separate Account, or both. Subject to this maximum, the Contract
Holder may also transfer the Insurance Account Value from the Available
Divisions of the Separate Account to the Fixed Fund.
-42-
<PAGE>
<PAGE>
Fixed Fund Benefits
If the Contract Holder allocates all Net Premiums only to the Fixed Fund and
makes no transfers, partial withdrawals, or Contract Loans, the entire
investment risk under the Contract will be borne by SELIC.
Fixed Fund Insurance Account Value
Net Premiums allocated to the Fixed Fund are credited to the Insurance
Account Value. SELIC bears the full investment risk for these amounts and
guarantees that interest credited to each Contract Holder's Insurance Account
Value in the Fixed Fund will not be less than a rate of at least 4.00% per
year, compounded annually. SELIC may, in its sole discretion, credit a higher
rate of interest, although it is not obligated to credit interest in excess
of 4.00% per year, and might not do so. Any interest credited on the
Contract's Insurance Account Value in the Fixed Fund in excess of the
guaranteed minimum rate of 4.00% per year will be determined in the sole
discretion of SELIC. The Contract Holder assumes the risk that interest
credited may not exceed the guaranteed minimum rate of 4.00% per year. If
excess interest is credited, a different rate of interest may be applied
to the value in the Borrowed Fund. The value in the Fixed Fund will be
calculated on each Monthiversary of the Contract.
SELIC guarantees that, on each Valuation Date, the Insurance Account Value in
the Fixed Fund will be the amount of the Net Premiums allocated or Insurance
Account Value transferred to the Fixed Fund, plus interest at the rate of
4.00% per year, plus any excess interest which SELIC credits and any amounts
transferred into the Fixed Fund, less the sum of all Contract charges
allocable to the Fixed Fund and any amounts deducted from the Fixed Fund in
connection with partial withdrawals, surrender charges or transfers to the
Separate Account.
On any given day the Insurance Account Value in the Fixed Fund will be equal
to the Insurance Account Value in the Fixed Fund on the prior Valuation Day
plus:
(1) Any new Net Premium allocated to the Fixed Fund;
(2) Any amount transferred to the Fixed Fund from an Available Division or
the Borrowed Fund; and
(3) Any interest credited to the Fixed Fund;
and less:
(1) Any amount transferred from the Fixed Fund to an Available Division or
the Borrowed Fund;
(2) The Cost of Insurance Charges allocated to the Fixed Fund (deducted
only on a Monthiversary);
-43-
<PAGE>
<PAGE>
(3) The Administration Charges allocated to the Fixed Fund (deducted only
on a Monthiversary);
(4) Any partial withdrawals taken from such Contract and allocated to the
Fixed Fund;
(5) Any charges allocated to the Fixed Fund that are deducted from the
Insurance Account Value for benefits provided by Contract riders;
(6) Any Underwriting Charges allocated to the Fixed Fund;
(7) Any charges for Special Insurance Class Rating allocated to the Fixed
Fund (deducted only on a Monthiversary); and
(8) Any other charges allocated to the Fixed Fund as stated in the
Contract.
For more information regarding the charges and expenses deducted under the
Contract, see "Charges and Deduction." For more information regarding the
impact that Contract Loans can have on Insurance Account Value and Net Cash
Value, see "The Contract -- Contract Loan Privilege."
Fixed Fund Transfers, Surrenders, Partial Withdrawals and Contract Loans
Prior to the Maturity Date, amounts may be transferred from the Fixed Fund to
the Available Divisions or partially withdrawn from the Fixed Fund.
Transfers from the Fixed Fund are subject to the following restrictions:
(a) The transfer must be made in the 30-day period following a Contract
Anniversary; and
(b) The amount transferred in any Contract Year may be no larger than
25% of the Insurance Account Value in the Fixed Fund on the date of
the transfer or withdrawal.
Contract Loans and partial withdrawals may also be made from the Contract's
Insurance Account Value in the Fixed Fund, subject to the conditions and
restrictions on Contract Loans and partial withdrawals described above. (See
"The Contract -- Contract Loan Privilege" and "The Contract -- Surrender and
Partial Withdrawals").
Transfers, surrenders, and partial withdrawals payable from the Fixed Fund
and the payment of Contract Loans allocated to the Fixed Fund may be delayed
for up to six months. However, if payment is deferred for 30 days or more,
SELIC will pay interest at the rate of 2.50% per year for the period of the
deferment. Amounts from the Fixed Fund used to pay Premiums on Contracts with
SELIC will not be delayed.
-44-
<PAGE>
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Contracts and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon SELIC's understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Service.
1. Tax Status of the Contract: Section 7702 of the Internal Revenue Code
of 1986, as amended (the "Code") sets forth a definition of a
life insurance contract for Federal tax purposes. The Section
7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section.
The manner in which these tests should be applied to certain
features of the Contract is not directly addressed by Section
7702 or proposed regulations issued under that section. The
presence of these Contract features, the absence of final
regulations, and lack of other pertinent interpretations of
Section 7702, thus creates some uncertainty about the
application of Section 7702 to the Contract.
Nevertheless, SELIC believes that the Contract generally
qualifies as a life insurance contract for federal tax
purposes. Because of the absence of final regulations or
any other pertinent interpretations, it, however, is unclear
whether a Contract with a joint and last survivor or a term
rider added will, in all cases, meet the statutory life
insurance contract definition. If a Contract were
determined not to be a life insurance contract for purposes
of Section 7702, such contract would not provide most of the
tax advantages normally provided by a life insurance
contract.
If it is subsequently determined that a Contract does not
satisfy Section 7702, SELIC will take whatever steps it
deems are appropriate and reasonable to cause a Contract to
comply with Section 7702. For these reasons, SELIC reserves
the right to modify the Contract as necessary to attempt to
qualify a Contract as a life insurance contract under
Section 7702.
Section 817(h) of the Code requires the investments of the
Separate Accounts to be "adequately diversified" in
accordance with Treasury Regulations for the Contract to
qualify as a life insurance contract under Section 7702 of
the Code. Failure to comply with the diversification
requirements may result in not treating the Contract as life
insurance. If the Contract does not qualify as life insurance
you may be subject to immediate taxation on the incremental
increases in Insurance Account Value of the Contract.
Regulations specifying the diversification requirements have
been issued by the Department of Treasury, and SELIC believes
it complies fully with such requirements. In connection with
the issuance of the diversification regulations, the Treasury
Department stated that it anticipates the issuance of
regulations or rulings prescribing the circumstances in which
an owner's control of the investments of a separate account may
cause the contract owner rather than the insurance company, to be
treated as the owner of the
-45-
<PAGE>
<PAGE>
assets in the separate account. If a Contract Holder is
considered the owner of the assets of the Separate Account,
income and gains from the Account would be included in the
Holder's gross income.
Though no Regulations on the subject of an owner's control
of the investments of a separate account have been issued
since the Regulations specifying the diversification
requirements were issued, informal guidance is available
from certain private letter rulings issued by the Internal
Revenue Service to individual taxpayers. The ownership
rights under the Contract are different in certain respects
from, those described by the Internal Revenue Service in
rulings in which it determined the owners were not owners of
separate account assets. For example, a Contract Holder has
additional flexibility in allocating premium payments and
cash values. These differences could result in the Contract
Holder being treated as the owner of a pro rata share of the
assets of the Separate Accounts. In addition, SELIC does
not know what standards will be set forth in any regulations
or additional rulings which the Treasury might issue. SELIC
therefore reserves the right to modify the Contract as
necessary to attempt to prevent the Contract Holder from
being considered the owner of a pro rata portion of the
assets of the Separate Accounts or to otherwise qualify the
Contract for favorable tax treatment.
The following discussion assumes that each Contract will
qualify as a life insurance contract for Federal income tax
purposes.
2. Tax Treatment of Contract Benefits: SELIC believes the death
benefit under the Contract should generally be excludable from
the gross income of the Beneficiaries under Section 101(a)(1)
of the Code.
Many changes or transactions involving a Contract may have
tax consequences, depending on the circumstances. Such
changes include but are not limited to the exchange of the
Contract, a change in a Contract's Face Amount, a change of
ownership, the payment of a subsequent premium, a partial
withdrawal from a Contract, a complete surrender of a
Contract, an assignment, a Contract Loan, or a Contract lapse
with an outstanding Contract Loan. In addition, Federal estate
and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Contract proceeds depend
on the circumstance of each Contract Holder or Beneficiary. A
competent tax adviser should be consulted for further information.
Generally, the Contract Holder will not be deemed to be in
constructive receipt of the Insurance Account Value
including increments thereof, under the Contract until there
is a distribution. The tax consequences of distributions
from, and loans taken from or secured by, the Contract(s)
should generally be determined on a Contract by Contract
basis. (See "Multiple Contracts," below.)
Such tax consequences further depend on whether the Contract
from which the distribution is made or Contract Loan is
taken is classified as a "modified endowment contract" under
Section 7702A. However, upon a complete surrender or lapse
of any Contract, if the amount received plus the amount of
Indebtedness exceeds the total
-46-
<PAGE>
<PAGE>
investment in the Contract, the excess will generally be treated
as ordinary income subject to tax.
3. Modified Endowment Contracts: A Contract may be treated as a modified
endowment contract depending upon the amount of premiums paid
in relation to the death benefit provided in respect of such
Contract. The premium limitation rules for determining
whether a Contract is a modified endowment contract are
complex. In general, a Contract will be a modified endowment
contract if the accumulated premiums paid at any time during
the first seven years after the Contract is established
exceeds the sum of the net level premiums which would have
been paid on or before such time if the future benefits
provided in respect of the Contract were deemed to be paid-up
after the payment of seven level annual premiums.
In addition, if the benefits or rights associated with a
Contract are "materially changed," it may cause such Contract
to be treated as a modified endowment contract. The material
change rules for determining whether a Contract is a modified
endowment contract are also complex. In general, however, the
determination of whether a Contract will be a modified
endowment contract after a material change generally depends
upon the relationship among the death benefit associated with
the Contract at the time of such change, the Insurance
Account Value at the time of the change and the additional
premiums paid in respect of the Contract during the seven
years starting with the date on which the material change
occurs. Moreover, a life insurance contract received in
exchange for a life insurance contract classified as a
modified endowment contract will also be treated as a
modified endowment contract.
(a) Distributions from Contracts Classified as Modified
Endowment Contracts: Contracts classified as modified
endowment contracts will be subject to the following
tax rules: First, all distributions, including
distributions upon lapse or surrender, from such a
Contract are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the
Insurance Account Value of the Contract immediately
before the distribution over the investment in the
Contract (described below) at such time. Second, loans
taken from or secured by, the Insurance Account Value
of such a Contract, as well as due but unpaid interest
thereon, are treated as distributions from such
Contract and taxed accordingly. Third, a 10 percent
additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by,
such a Contract that is included in income except where
the distribution or loan is made on or after the
taxpayer attains age 59 1/2, is attributable to the
taxpayer's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or
life expectancy) of the taxpayer or the joint lives (or
joint life expectancies) of the taxpayer and the
taxpayer's Beneficiary. Contract Holders that are not
natural persons are unlikely to meet these exceptions.
If a Contract becomes a modified endowment
Contract after it is issued, distributions made
during the Contract year in which it becomes a
modified
-47-
<PAGE>
<PAGE>
endowment Contract, distributions in any
subsequent Contract year and distributions within
two years before the Contract becomes a modified
endowment Contract will be subject to the tax
treatment described above. This means that a
distribution from a Contract that is not a
modified endowment Contract could later become
taxable as a distribution from a modified
endowment Contract.
(b) Distributions From Contracts Not Classified as Modified
Endowment Contracts: Distributions from a Contract
that is not a modified endowment contract are
generally treated as first recovering the
investment in the Contract (described below) and
then, only after the return of all such investment
in the Contract, as distributing taxable income.
An exception to this general rule may occur in the
case of a decrease in the death benefit provided
in respect of a Contract (possibly resulting from
a partial withdrawal) or any other change that
reduces benefits associated with the Contract in
the first 15 years after the Contract is
established and that results in a cash
distribution to the Contract Holder in order for
the Contract to continue complying with the
Section 7702 definitional limits. Such a cash
distribution will be taxed in whole or in part as
ordinary income (to the extent of any gain in the
Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not
a modified endowment contract are generally not
treated as distributions. Instead, such loans are
generally treated as indebtedness of the Contract
Holder. However, if the Service or a court were to
deem the loan not 'bona fide', it is possible that
the loans from the Contract may be treated as
taxable distributions.
Neither distributions (including distributions
upon surrender or lapse) nor loans from, or
secured by, a Contract that is not a modified
endowment contract are subject to the 10%
additional income tax. If a Contract which is not
a modified endowment contract subsequently becomes
a modified endowment contract, then any
distribution made from the Contract within two
years prior to the date of such change in status
may become taxable and subject to the 10%
additional income tax.
(c) Classification of Contract: Due to the Contract's
flexibility, classification of a Contract as a
modified endowment contract will depend upon the
circumstances of each Contract. SELIC has adopted
administrative steps designed to protect a
Contract Holder against the possibility that a
Contract might become a modified endowment
contract. SELIC believes the safeguards are
adequate for most situations, but it cannot
provide complete assurance that a Contract will
not be classified as a modified endowment
contract. At the time a Net Premium is credited
which (according to SELIC's calculations) would
cause a Contract to become a modified endowment
contract, SELIC will notify the Contract Holder
that unless a refund of the excess Premium is
requested by the Contract Holder, the Contract
will be a modified endowment contract. The
Contract Holder will
-48-
<PAGE>
<PAGE>
have 30 days after receiving such notification
to request the refund. If the Contract Holder
requests a refund, SELIC will refund the excess
Premium paid, plus the greater of (a) the investment
gain on the excess premium, or (b) interest on the
excess Premium calculated at an annual rate of
4.00%. The amount to be refunded will be deducted
from the Insurance Account Value in the Available
Divisions and in the Fixed Fund in the same proportion
as the payment was allocated.
A Contract Holder should contact a competent tax adviser before
purchasing a Contract to determine the circumstances under which a
Contract would be a modified endowment contract. In addition, a
Contract Holder should contact a competent tax adviser before
paying any additional premiums; making any other change to,
including an exchange of, a Contract; or making a change to the
benefits provided under a Contract to determine whether such premium
or change would cause the Contract (or the new contract in the case
of an exchange) to be treated as a modified endowment contract.
4. Loan Interest: Generally, interest paid on any loan under a life
insurance contract owned by an individual is not deductible. In
addition, interest on any loan under a life insurance contract
owned by a business taxpayer on the life of any individual who is
an officer of or is financially interested in the business carried
on by that taxpayer is deductible only under certain very limited
circumstances. A Contract Holder should consult a competent tax
adviser before deducting any loan interest.
5. Investment in a Contract: Investment in a Contract means (i) the
aggregate amount of any premiums or other consideration paid in
respect of a Contract, minus (ii) the aggregate amount received
under the Contract which is excluded from gross income of the
Contract Holder (except that the amount of any loan from, or
secured by, a Contract that is a modified endowment contract, to
the extent such amount is excluded from gross income, will be
disregarded), plus (iii) the amount of any loan from or secured by
a Contract that is a modified endowment contract to the extent
that such amount is included in the gross income of the Contract
Holder.
6. Multiple Contracts: All modified endowment contracts that are issued
by SELIC (or its affiliates) to the same Contract Holder during
any calendar year are treated as one modified endowment contract
for purposes of determining the amount includible in gross income
under section 72(e) of the Code. In view of this rule, in the
event that a number of Contracts are established at the same time
or during the same calendar year, it is important to determine
how many, if any, of the Contracts will be treated as modified
endowment contracts. A competent tax adviser should be consulted
for further information.
7. Interest Expense on Unrelated Indebtedness: Under provisions added
to the Code in 1997 applicable to insurance policies issued after
June 8, 1997, if a business taxpayer owns or is the beneficiary
of a Contract on the life of any individual who is not an
officer, director, employee, or 20 percent owner of the
business carried on by that taxpayer and the taxpayer also has
indebtedness unrelated to the Contract, no tax deduction will be
-49-
<PAGE>
<PAGE>
allowed for that portion of the taxpayer's unrelated
interest expense that is "allocable" to the Net Cash Value
(unborrowed Insurance Account Value) of the Contract. The
allocable portion of unrelated interest expense is based on the
ratio of the unborrowed cash surrender values of all life
insurance and annuity contracts issued to the taxpayer after
June 8, 1997 to the adjusted basis of all other assets of the
taxpayer. A Contract issued before June 9, 1997 will become
subject to this pro rata disallowance rule if there is a material
increase in the death benefit or other material change in the
terms of the Contract. No business taxpayer should purchase,
exchange, or increase the death benefit under a Contract on the
life of any individual who is not an officer, director, employee,
or 20 percent owner of the business without specifically
considering the overall tax effect that an interest in such a
Contract would, or could, have.
8. Alternative Minimum Tax: There may also be an indirect tax upon the
inside build-up of the Contract under the corporate alternative
minimum tax.
9. Other Tax Consequences. The Contract may be used in various
arrangements, including nonqualified deferred compensation or
salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the facts and
circumstances of each individual arrangement. Therefore, if you
are contemplating the use of the Contract in any arrangement
the value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax advisor regarding the
tax attributes of the particular arrangement and the
suitability of this product for the arrangement.
10. Possible Changes in Taxation: As of the date of this Prospectus, the
President's budget for fiscal year 1999 includes proposals that
would (i) restrict even further the deductibility of policy loan
interest, so that no policy loan interest would be deductible
except for interest on loans under policies insuring 20 percent
owners, (ii) expand the unrelated interest expense pro rata
disallowance rule enacted in 1997 so that the rule would apply
to all policies owned by business entities, except for policies
on 20 percent owners, (iii) tax the inside buildup of variable
life insurance policies whenever policy values were reallocated
among investment options available under a policy, (iv) end the
tax free treatment under Code section 1035 of exchanges of
variable life insurance policies, and (v) decrease the
policyholder's tax basis in an insurance contract by the amount
of mortality and expense charges paid to the insurer over the
life of the contract. Moreover, it is possible that any changes
in the tax treatment of life insurance policies could be
effective prior to the date of any new legislation.
11. Possible Charge for Taxes: SELIC is presently taxed as a life insurance
company and does not incur federal income tax liability, or state
or local tax liability, attributable to investment income or
capital gains of the Separate Account. Based on these assumptions,
no charge is currently being made to the Separate Account for federal
income taxes, or state or local taxes. However, SELIC may in the future
impose such a charge if (i) the tax treatment of SELIC is ultimately
determined to be other than what SELIC believes it to
-50-
<PAGE>
<PAGE>
be, (ii) there are changes made in the income tax treatment, or
state or local tax treatment, of variable life insurance at the
company level, or of the separate accounts, or (iii) there is a
change in SELIC's status. Any such charge would be designed to
cover the taxes attributable to the investment results of the
Separate Accounts.
ADDITIONAL PROVISIONS OF THE CONTRACT
Addition, Deletion, or Substitution of Investments
SELIC reserves the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held
by the Separate Account or that the Separate Account may purchase. SELIC
reserves the right to eliminate the shares of any of the Underlying
Portfolios and to substitute the shares of another registered open-end
investment company if the shares of an Underlying Portfolio are no longer
available for investment or if, in SELIC's judgment, further investment in
any Underlying Portfolio becomes inappropriate in view of the purposes of the
Separate Account. SELIC will not substitute any shares attributable to a
Contract Holder's interest in a Division of a Separate Account without notice
to the Contract Holder and prior approval of the SEC, to the extent required
by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of contracts, or from permitting a
conversion between series or classes of contracts on the basis of requests
made by Contract Holders.
The participation agreements pursuant to which Underlying Portfolios sell
shares to the Separate Account can be terminated by the Underlying Portfolio
or by SELIC under a variety of circumstances, with or without cause.
SELIC also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new investment company,
with a specified investment objective. New Divisions may be established
when, in the sole discretion of SELIC, marketing needs or investment
conditions warrant, and any new Division will be made available to existing
Contract Holders on a basis to be determined by SELIC. SELIC may also
eliminate or combine one or more Divisions, substitute one Division for
another Division, or transfer assets between Divisions, if, in its sole
discretion, marketing, tax, or investment conditions warrant; such changes
will not occur without notice to the Contract Holder and prior approval of
the SEC, to the extent required by the 1940 Act or other applicable law.
In the event of a substitution or change, SELIC may, if it considers it
necessary, make changes in the Contract by appropriate endorsement. SELIC
will notify Contract Holders of any such changes.
If deemed by SELIC to be in the best interests of persons having voting
rights under the Contracts, and to the extent any necessary SEC approvals or
Contract Holder votes are obtained, the Separate Account may be: (a) operated
as a management company under the 1940 Act; (b) de-registered under that Act
in the event such registration is no longer required; or (c) combined
-51-
<PAGE>
<PAGE>
with other separate accounts of SELIC. To the extent permitted by applicable
law, SELIC may also transfer the assets of the Separate Account associated with
the Contract to another separate account.
Also, subject to the approval of the New York Superintendent of Insurance,
SELIC has the right to change the investment policy of any Separate Account
Division. If required, the process for obtaining approval of a material
change from the New York Superintendent of Insurance will be filed with the
insurance supervisory official of the Governing Jurisdiction. SELIC will
notify the Contract Holder if any material change of investment policy is
approved.
Incontestability
SELIC must bring any legal action to contest the validity of any insurance
coverage under the Contract within two years from the applicable Issue Date
of the Contract, or from the effective date of any change in coverage
requiring medical evidence of insurability, as applicable.
Conversion Rights
Once the Contract is issued and as long as the Contract is in force, a
Contract Holder may during the first 24 months, transfer all of the Insurance
Account Value into the Fixed Fund and receive fixed and guaranteed benefits
under the Contract. Once this right is exercised, no transfers out of the
Fixed Fund will be allowed and all Net Premiums paid after the election will
be allocated to the Fixed Fund. This request must be in writing and must
specifically indicate that the transfer is being made pursuant to the
Conversion Right. This transfer will not be subject to any transfer
limitations or charges. At the time of such transfer, there will not be any
effect on the Contract's Death Benefit, Contract Loans, Face Amount, Net
Amount at Risk, Issue Age or insurance class. All benefits after a
conversion will be based upon the Fixed Fund.
Misstatement of Age or Sex
If the age or sex of the Insured has been misstated in the Application and
the misstatement is discovered after the Insured's death, the amount of death
benefit payable by SELIC will be that which the most recent mortality charges
would have purchased for the correct age and sex. If the Insured is still
living at the time of discovery, future amounts payable will be adjusted
based upon the correct facts.
Suicide
Subject to the insurance laws of the Governing Jurisdiction, if the Insured
commits suicide, while sane or insane, within two years from the date
coverage becomes effective with respect to such person under the Contract,
only a limited Death Benefit will be payable. In such case, the amount of
the Death Benefit will be equal to the amount of the Net Premiums paid, less
any partial withdrawals, and less any Contract Loans and any Contract Loan
interest accrued but unpaid.
-52-
<PAGE>
<PAGE>
If, after the expiration of the two year period described above, the Insured
commits suicide within two years from the date of receipt of any subsequent
Premium that increases the amount of the Death Benefit, the amount of the
Death benefit attributable to such increase will be limited to a refund of
the Cost of Insurance Charges made for such increase.
Availability of Funds
Cash payments from the Contract for partial withdrawals, Contract Loans, and
surrenders will usually be made within seven days after a written request is
received at the Home Office of SELIC. Transfers between or among Separate
Account Divisions will usually be effected on the date the transfer request
is received in good order. Payment or transfers may be delayed, however,
during any period that:
(1) The New York Stock Exchange (or its successor) is closed for trading;
or
(2) The SEC determines that a state of emergency exists.
Payment of the portion of any amount payable from the Fixed Fund for Contract
Loans, partial withdrawals or surrender, and transfers to the Separate
Account Divisions may be delayed for not more than six months. If payment is
deferred for 30 days or more, SELIC will pay interest on such amounts at the
rate of 2.50% per year for the period of deferment.
Entire Contract
The Contract is issued in consideration of the Application and the Initial
Premium. The Contract and Application, a copy of which is attached to the
Contract, together with any Contract Schedules, any riders, and any other
related documents constitute the entire Contract. Any waiver or change of
any provision in the Contract must be in writing and signed by an officer of
SELIC. Additional insurance benefits may be made available under the
Contract by rider. Any such riders selected by the Contract Holder and
agreed to by SELIC will be attached to and made a part of the Contract.
The failure of SELIC to enforce any provision of the Contract does not
constitute and cannot be construed as a waiver of such provision or of the
right to enforce it at a later time, nor does the waiver of any provision by
SELIC on one or more occasions constitute nor can it be construed as a waiver
for all occasions, and SELIC cannot be stopped from enforcing any provision
of the Contract except as may be otherwise agreed to in writing by an officer
of SELIC.
Representations in Application
SELIC deems all statements in the Application to be representations and not
warranties. SELIC will not use any statement, in the absence of fraud, to
void the Contract or to defend a claim for the insurance benefits under the
Contract unless it is contained in the Application and a copy of the
Application is attached to the Contract on the Issue Date, or unless it is
contained in a related document and signed either by the Contract Holder or
by the proposed Insured, and a copy of
-53-
<PAGE>
<PAGE>
such completed document is provided to the Contract Holder on the Issue Date
or on the effective date of any change requiring evidence of insurability.
Contract Application and Contract Schedules
If any information contained in the Contract, Application, Contract
Schedules, or any other related documents for the Contract is inaccurate or
untrue on the date the Contract is issued, the Contract Holder is required
under the Contract to promptly notify SELIC and provide corrected
information.
Right to Amend Contract
If any provision in the Contract is in conflict with the laws of the
Governing Jurisdiction, the provision will be deemed to be amended to conform
with such laws. SELIC may amend the Contract from time to time as may be
required to meet the definition of "life insurance" under the Internal
Revenue Code of 1986, as amended, or its regulations or published rulings.
Computation of Contract Values
A detailed statement of the method used to compute the Contract's benefits
and values is filed with the insurance regulatory authority of the Governing
Jurisdiction. These benefits and values are not less than those required by
the laws of the Governing Jurisdiction.
Claims of Creditors
The proceeds of the Contract will be free from creditors' claims to the
extent allowed by law.
Notice
Any written notice required by the Contract to be given by SELIC to the
Contract Holder will be effective five days after it is mailed by first class
mail or 15 days after it is mailed by third class mail (or when received, if
sent by any other means) to the Contract Holder at the Contract Holder's
current address as noted on the records of SELIC.
Any written notice required by the Contract to be given by the Contract
Holder to SELIC will be effective when received in a form acceptable to SELIC
at its Home Office. To be acceptable, a notice must be in written form, in
the English language (except where applicable law requires otherwise), must
include all pertinent information, and must be signed by the Contract Holder
or an individual authorized to act for the Contract Holder and so designated
on the records of SELIC.
-54-
<PAGE>
<PAGE>
Assignments
Neither the Contract nor any of the rights of the Contract Holder or
Beneficiary under it may be assigned or transferred without the written
permission of SELIC.
Construction
In the event of a conflict between the Contract provisions and the
information contained in any Contract Schedule, the provisions of the
Contract will be controlling.
Severability
In the event any provision of the Contract is declared illegal or otherwise
unenforceable, it will be severed from the Contract and the remainder of the
Contract will be valid and enforceable.
State Variations
Certain Contract features, including the "Free Look" provision, are subject
to state variations. The Contract Holder should read his or her Contract
carefully to determine whether any variations apply in the state in which the
Contract is issued.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The state of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the lives of its residents. Therefore, all Contracts
offered by this Prospectus and issued for delivery in Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account Divisions will be
maintained by SELIC. Each year within 30 days after the Contract
Anniversary, SELIC will mail a report to the Contract Holder. The report
will show the Insurance Account Value at the beginning of the previous
Contract Year and all Premiums paid since that time. It will also show the
additions to, and deductions from, the Insurance Account Value during the
Contract Year, and the Insurance Account Value, Death Benefit, Net Cash
Value, any outstanding Contract Loan amount and accrued Contract Loan
interest as of the current Contract Anniversary. The report will also
include any additional information required by applicable law or regulation.
SELIC also will mail the Contract Holder any other reports or documents
required by applicable law or regulation.
-55-
<PAGE>
<PAGE>
In addition to the periodic reports, the Contract Holder may request an
illustrative report showing projected Contract values. There may be a charge
for providing an illustrative report. (See "Charges and Deductions -- Other
Charges").
SALE OF THE CONTRACT
The Contract will be sold by individuals who, in addition to being licensed
as life insurance agents for SELIC, are also registered representatives of
Walnut Street Securities, Inc. ("Walnut Street"), the distributors of the
Contract, or of broker-dealers or through banks who have entered into written
sales agreements with Walnut Street. Walnut Street was incorporated under the
laws of Missouri in 1984 and is a subsidiary of GenAmerica Corporation. Walnut
Street is registered with the SEC as a broker-dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. No director or officer of Walnut Street owns any interest in the
Separate Account, however, the policies issued through the Separate Account may
be used to fund nonqualified deferred obligations of the depositor or its
affiliates subject to any regulatory requirements.
SELIC will pay the writing agent compensation equal to the Commission Charge
in connection with the Contract Holder's purchase of the Contract plus a
maximum of 22% of Target Premium and a maximum of 5.00% of any Excess Premium.
VOTING RIGHTS
To the extent required by law, SELIC will vote shares of the Underlying
Portfolios held in the Separate Account at regular or special shareholder
meetings of the Underlying Portfolios in accordance with instructions
received from persons having voting interests in the corresponding Divisions
of the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote
shares of the Underlying Portfolios in its own right, it may elect to do so.
The number of votes that a Contract Holder has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Contract Holder at the record date rather than the number of
units alone. Fractional shares will be counted. The number of votes of an
Underlying Portfolio that the Contract Holder has the right to instruct will
be determined as of the date established by that Underlying Portfolio for
determining eligibility to vote at the meetings of the Underlying Portfolio.
The formula used to determine the number of votes of an Underlying Portfolio
that the Contract Holder has the right to instruct will be:
Total Value of Policy's Cash Value in the Underlying Portfolio
divided by
Total Value of the Underlying Portfolio
multiplied by
Total Number of Votes
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the Underlying Portfolio.
SELIC will vote shares as to which no timely instructions are received in
proportion to the voting instructions which are received with respect to the
contracts participating in that Underlying
-56-
<PAGE>
<PAGE>
Portfolio. SELIC will also vote shares it owns that are not attributable to
contracts in the same proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Underlying
Portfolio.
Disregard of Voting Instructions: SELIC may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
sub-classification, or investment objective of an Underlying Portfolio, or one
or more of its Series, or to approve or disapprove an investment advisory
contract for an Underlying Portfolio. In addition, SELIC itself may
disregard voting instructions in favor of changes proposed by a Contract
Holder in the investment advisory agreement or the investment adviser of an
Underlying Portfolio if SELIC reasonably disapproves of such changes. A
proposed change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities, or SELIC
determines that the change would have an adverse effect on its General
Account in that the proposed investment advisory contract for an Underlying
Portfolio may result in overly speculative or unsound investments. In the
event SELIC does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next annual report to
Contract Holders.
STATE REGULATION OF THE COMPANY
SELIC, a stock life insurance company organized under the laws of New York,
is subject to regulation by the New York Department of Insurance. An annual
statement is filed with the Superintendent of Insurance on or before March
1st of each year covering the operations and reporting on the financial
condition of SELIC as of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of the
Company and the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.
In addition, SELIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
-57-
<PAGE>
<PAGE>
<TABLE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS AND PRINCIPAL OFFICERS
<CAPTION>
Name Principal Occupation(s) During Past Five Years
<C> <S>
Willard N. Archie SELIC Director; Chief Executive Officer, Mitchell, Titus & Company (CPA management
Chief Executive Officer consulting firm). Prior to January 1998, Vice Chairman, Mitchell, Titus & Company. Prior
Mitchell, Titus & Company to January 1996, Managing Partner, Mitchell, Titus & Company.
One Battery Park Plaza
New York, NY 10004-1461
Carson E. Beadle, SELIC Director; Consultant, Carson E. Beadle, Inc. (consulting). Prior to April 1998,
Consultant Managing Director, William M. Mercer Inc. (actuarial, employee benefits, compensation and
Carson E. Beadle, Inc. human resources management consulting firm)
750 Park Avenue, Apt. 14E
New York, NY 10021
James R. Elsesser SELIC Director; Vice President and Chief Financial Officer, Ralston Purina Company (pet food,
Vice President & CFO batteries, and bread business).
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Stanley Goldstein SELIC Director; Partner, Goldstein, Golub, Kessler & Company (accounting services).
Goldstein, Golub, Kessler & Co.
1185 Sixth Avenue
New York, NY 10036
David D. Holbrook SELIC Director; J&H, Marsh & McLennan. Prior to May 1997, Chairman, Marsh & McLennan, Inc.
J&H, Marsh & McLennan, Inc. (insurance and reinsurance brokers, consulting and investment management).
1166 Avenue of the Americas
New York, NY 10036
Richard A. Liddy SELIC Director; Chairman of the Board; President and Chief Executive Officer, General
Chairman, President and CEO American Life Insurance Co. (life insurance).
General American Life Insurance Co.
700 Market Street
St. Louis, MO 63101
-58-
<PAGE>
<PAGE>
Leonard M. Rubenstein, SELIC Director; Chairman, Chief Executive Officer and Chief Investment Officer - Conning
Chairman, CEO and CIO Conning Asset Asset Management Company (investments). Prior to January 1998, Executive Vice President -
Management Company Investments, General American Life Insurance Co. (life insurance).
700 Market Street
St. Louis, MO 63101
William C. Thater SELIC Director and President; Prior to June 1993, Vice President - Individual
President Life, General American Life Insurance Co. (life insurance).
Security Equity Life Insurance Co.
84 Business Park Drive, Suite #303
Armonk, NY 10504
H. Edwin Trusheim SELIC Director; Retired Chairman, General American Life Insurance Co. (life insurance).
General American Life Insurance Co.
700 Market Street
St. Louis, MO 63101
Virginia V. Weldon, M.D. SELIC Director; Prior to March 1998, Senior Vice President, Monsanto Company (chemicals
242 Carlyle Lake diversified industry, pharmaceuticals, life science products, and food ingredients business).
St. Louis, MO 63141
Ted C. Wetterau SELIC Director; Chairman and Chief Executive Officer, Wetterau &
Chairman and CEO Associates, Inc. (retail and wholesale grocery, manufacturing business).
Wetterau Associates
8112 Maryland Avenue, Suite 250
St. Louis, MO 63105
Ben H. Wolzenski, SELIC Director; Executive Vice President, General American Life Insurance Co. (life
Executive Vice President - insurance).
Individual
General American Life Insurance Co.
13045 Tesson Ferry Road
St. Louis, MO 63128
A. Greig Woodring SELIC Director; CEO & President, Reinsurance Group of American, Inc. (reinsurace). Prior
CEO & President Executive Vice President - Reinsurance, Genreal American Life Ins. Co.
Reinsurance Group of America, Inc.
660 Mason Ridge Center, Dr.,
Suite 300
St. Louis, MO 63141
</TABLE>
-59-
<PAGE>
<PAGE>
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities
laws has been provided by Christopher A. Martin, General Counsel, SELIC.
LEGAL PROCEEDINGS
Neither SELIC nor the Separate Account is involved in any material legal
proceedings.
EXPERTS
The audited financial statements of Security Equity Life Insurance
Company and the Separate Account have been included in this Prospectus
in reliance on the reports of KPMG LLP, independent certified public
accountants, and on the authority of said firm as experts in accounting
and auditing.The report of KPMG LLP covering the December 31, 1998,
financial statements of Security Equity Life Insurance Company refers to a
change in accounting for the capitalization of acquisition costs.
Actuarial matters included in this prospectus have been examined by
Ralph A. Gorter of Security Equity Life Insurance Company, whose opinion
is filed as an exhibit to the registration statement for the Contracts.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect
to the Contracts. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits
to the registration statement, to all of which reference is made for
further information concerning the Separate Account, SELIC and the
Contracts. Statements contained in this Prospectus as to the contents of
the Contract and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
Like all financial services providers, Security Equity utilizes systems
that may be affected by the Year 2000 transition issues, and it relies
on services providers, including the underlying funds, that may also be
affected. The company has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its
services providers are also so engaged. The resources that are being
devoted to this effort are substantial. It is difficult to predict with
precision whether the amount of resources ultimately devoted, or the
outcome of these efforts, will have any negative impact on the Company.
However, as of the date of this prospectus, we do not anticipate that
policy owners will experience negative effects on their investment, or
on the services provided in connection therewith, as a result of Year
2000 transition implementation. Security Equity currently anticipates
that its systems will be Year 2000 compliant, but there can be no
assurance that the company will be successful, or that interaction with
other service providers will not impair the company's services at that
time.
FINANCIAL STATEMENTS
The financial statements of SELIC which are included in this Prospectus
should be distinguished from the financial statements of the Separate
Account, and should be considered only as bearing on the ability of
SELIC to meet its obligations under the Contract. They should not be
considered as bearing on the investment performance of the assets held
in the Separate Account.
-60-
<PAGE>
<PAGE>
APPENDIX A -- UNDERLYING PORTFOLIOS
The Available Division of the Separate Account invests in shares or units of
an Underlying Portfolio from the following open-end, management investment
companies:
Evergreen Variable Trust
Evergreen VA Fund
Evergreen VA Foundation Fund
Evergreen VA Growth and Income Fund
Frank Russell Investment Management Company
Aggressive Equity Fund
Core Bond Fund
Multi-Style Equity Fund
Non-U.S. Fund
General American Capital Company
Money Market Fund
Variable Insurance Products Fund
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Variable Insurance Product Funds II
Asset Manager Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
Contrafund Portfolio
VARIABLE INSURANCE PRODUCT FUNDS III
Balanced Portfolio
JANUS ASPEN SERIES
Balanced Portfolio
Growth Portfolio
Worldwide Growth Portfolio
Each Underlying Portfolio operates as a separate investment vehicle, and the
income or losses of one Underlying Portfolio has no effect on the investment
performance of any other Underlying Portfolio.
This Prospectus must be accompanied by a current prospectus for each
Underlying Portfolio listed.
The prospectus for each Underlying Portfolio includes information regarding
the investment advisory fee and operating expenses of the Underlying
Portfolio, which are reflected in the value of the Accumulation Units of the
Division of the Separate Account that invests in such Underlying Portfolio.
The prospectus for each Underlying Portfolio also includes investment
strategies, objectives and investment advisor.
A-1
<PAGE>
<PAGE>
APPENDIX B -- CONTRACT RIDERS
Joint and Last Survivor Rider
-----------------------------
The Joint and Last Survivor Rider modifies the Contract to provide insurance
coverage on the lives of two Insureds. The rider will be subject to all
terms in the Contract, and the addition of the rider will not change any
mechanics of the Contract, except as modified in the Contract and highlighted
below. Some of the discussions in the Prospectus applicable to the Contract
apply differently to a Contract to which a Joint and Last Survivor Rider has
been added. Set out below are the modifications to designated sections of
the Prospectus in the event that a Joint and Last Survivor Rider is added to
the Contract. Except as noted below, the discussions in the Prospectus
referencing a single Insured can be read as though the single Insured was two
Insureds under a Contract with a Joint and Last Survivor Rider.
Definitions
- ------------
The following definitions apply to a Contract with a Joint and Last Survivor
Rider:
First Insured: The first person of the two Insureds to die.
Insured: A person whose life is insured under the terms of the Contract.
There are two Insureds under the Contract. Both Insureds are shown in the
Contract.
Joint and Last Survivor Rider: A rider added attached to the Contract
described in this Prospectus, which will amend the Contract to pay a Death
Benefit after the death of Last Insured.
Last Insured: The last person of the two Insureds to die.
The following are the major differences between a Contract with a Joint and
Last Survivor Rider added, and a Contract without this rider.
1. All conditions of eligibility of a prospective Insured will be
applied to both Insureds in order for a Contract with a Joint
and Last Survivor Rider to be issued. (See "The Contract --
Availability of Insurance Coverage").
2. Death Benefits will be paid on a Temporary Insurance Coverage
basis only if both Insureds meet SELIC's usual and customary
underwriting standards for the applied for coverage. (See "The
Contract -- Availability of Insurance Coverage").
B-1
<PAGE>
<PAGE>
3. All Contracts that are issued with a Joint and Last Survivor
Rider attached will require medical evidence of insurability.
(See "The Contract -- Evidence of Insurability").
4. All Contracts that are issued with a Joint and Last Survivor
Rider attached will pay a Death Benefit only on the death of the
Last Insured. No Death Benefit will be paid on the death of the
First Insured. (See "The Contract -- Death Benefits Under the
Contract").
5. No change in Death Benefit Option or Face Amount will be
effective if the Last Insured dies before the change is
effective. (See "The Contract -- Death Benefit Options" and
"The Contract -- Death Benefits Under the Contract").
6. In general, a Contract with a Joint and Last Survivor Rider will
have a lower Target Premium than a Contract issued on a single
Insured with the same Total Insurance Coverage. This will result
in lower Commission Charges for a Contract with the same Total
Insurance Coverage. (See "Charges and Deductions -- Premium
Load").
7. A deduction for SELIC's cost of insurance protection is made on
each Monthiversary and in general will be based upon the sex and
smoker status of the two Insureds. The Joint and Last Survivor
cost of insurance rates will be blended rates based upon the
Issue Ages of the Insureds, the number of completed Contract
Years, as well as the sex and smoker status of the Insureds. The
cost of insurance rates may also vary by any special insurance
class charges.
The guaranteed cost of insurance rates will not be greater than
the guaranteed maximum cost of insurance rates set forth in the
Contract. These rates, as well as the rates used to calculate
the Minimum Death Benefit and limitations on Premiums payable
under the Contract, are based on the 1980 Commissioners Standard
Ordinary Tables, Age Nearest Birthday, that correspond to the
applicable ages, sex and smoker status of the Insureds. Current
cost of insurance rates may be lower.
Since a benefit is paid only in the event that both Insureds have
died, Cost of Insurance Charges for Contracts with a Joint and
Last Survivor Rider attached will generally be lower than the
charges for a comparable single life Contract. (See "Charges and
Deductions -- Cost of Insurance Charge").
8. The calculation of the Minimum Death Benefit and any limitations
on Premiums will reflect the fact that no Death Benefit will be
paid until the
B-2
<PAGE>
<PAGE>
death of the Last Insured. Assuming the same amount of requested
Insurance Coverage, any limitations on Premiums payable under the
Contract will be lower than those based upon a single life, while
the Minimum Death Benefits will be higher than those based upon a
single life. (See "The Contract -- Death Benefits Under the
Contract").
9. The Underwriting Charge for Contracts issued with a Joint and
Last Survivor Rider attached will be equal to the sum of a flat
fee and a charge per $1,000 of Total Insurance Coverage, subject
to a maximum charge. This charge is determined separately for
each Insured. The charges for each Insured are added together to
obtain the total charge for the Contact. This charge is deducted
on each Monthiversary for the first 12 Contract Months. The flat
fee, charge per $1,000, and maximum charge are shown in the table
below.
<TABLE>
<CAPTION>
Per $1,000 of Maximum Total
Flat Fee Total Insurance Underwriting Charge Per
Issue Age Per Month Coverage Per Month Insured Per Month
<S> <C> <C> <C>
20 - 45 $4.17 $.00833 $37.50
46 - 60 $4.17 $.01250 $54.17
61 - 85 $4.17 $.01667 $54.17
</TABLE>
If there is a Contract change after issue which requires medical
underwriting, SELIC will deduct on the Monthiversary following
the underwriting an amount per Insured equal to $100, plus the
per thousand charge above multiplied by 12, multiplied by the
increase in the Net Amount at Risk to which the underwriting
relates, subject to the maximum charge shown above. (See
"Charges and Deductions -- Underwriting Charges").
SELIC may, in its sole discretion, reduce or waive the
Underwriting Charge in connection with the purchase of Contracts
sold by licensed agents of SELIC that are also registered
representatives of selected broker-dealers or through banks that
have entered into written sales agreements with Walnut Street.
Any reduction in or waiver of the Underwriting Charge will be
reflected in the Contract.
10. The Maturity Date of Contracts issued with a Joint and Last
Survivor Rider attached will be when the younger of the two
Insureds reaches the attained age of 100. (See "Termination --
Maturity Date").
B-3
<PAGE>
<PAGE>
11. For a Contract issued with a Joint and Last Survivor Rider
attached to be reinstated, both Insureds must be alive on the
date of reinstatement. (See "Termination -- Reinstatement of a
Contract Terminated for Insufficient Value").
12. A limited Death Benefit will be paid on a Contract issued with a
Joint and Last Survivor Rider if either Insured commits suicide
within two years from the date coverage becomes effective or
within two years from the date of receipt of a Subsequent Premium
payment which increases the Death Benefit. (See "Additional
Provisions of the Contract -- Suicide").
Supplemental Term Insurance Rider
---------------------------------
A Contract Holder may elect to add a Supplemental Term Insurance Rider to the
Contract at the time of the Application. The Supplemental Term Insurance
Rider increases the Total Insurance Amount under the Contract. The addition
of this Rider will allow SELIC to deduct additional monthly charges from the
Insurance Account Value of the Contract.
This rider may be added to a single life Contract, or a Contract to which a
Joint and Last Survivor Rider has been attached.
Set out below are additional definitions and other modifications applicable
when a Supplemental Term Rider is added to a Contract.
Definitions
- ------------
The following definitions apply to a Contract with a Supplemental Term
Insurance Rider:
Date of Death Upon Which Death Benefit becomes Payable: The date of death of
the Insured, for a single life Contract, or the Last Insured for a Contract
to which a Joint and Last Survivor Rider has been added.
Rider Death Benefit: Is the amount of Supplemental Term Insurance Coverage
under the Rider.
Supplemental Term Insurance Rider: A rider added to the Contract described
in this Prospectus, which will increase the Total Insurance Amount under the
Contract.
Supplemental Term Insurance Benefit
The Supplemental Term Insurance Rider provides term insurance coverage (the
Rider Death Benefit) that is in addition to insurance coverage provided under
the Contract. SELIC will pay the Rider Death Benefit to the beneficiary if
the Date of Death Upon
B-4
<PAGE>
<PAGE>
Which Death Benefit becomes Payable occurs while the rider is in force.
SELIC must receive proof that such death occurred before the Rider Expiry
Date in the Contract, or the termination of the coverage provided by the
Supplemental Term Insurance Rider, if earlier, as specified in the rider
and the Contract.
The Contract Holder may, subject to the approval of the Company, change the
Supplemental Term Insurance Amount. The Contract Holder must request any
change not specified in the Contract by notifying SELIC in writing. Evidence
of Insurability will be required for any change that increases the
Supplemental Term Insurance Amount. If SELIC approves the change, it will
take effect on the next Monthiversary which is at least 30 days after all the
required information has been provided to SELIC. The Contract will be
amended to reflect any such change in the Supplemental Term Insurance Amount.
No change will be effective if the Date Upon Which Death Benefit becomes
Payable is before the date of the change.
Monthly Charges For Supplemental Term Insurance Amounts - Cost of Insurance
Charges
Charges for the Supplemental Term Insurance Rider, which consist of monthly
Cost of Insurance Charges for the Rider Death Benefit, are deducted from the
Insurance Account Value on each Monthiversary. The charges are determined by
multiplying the rider Net Amount At Risk by the current monthly Cost of
Insurance Rate for the rider.
The rider Net Amount at Risk on any Monthiversary is equal to:
(a) The Supplemental Term Insurance Amount discounted to such
Monthiversary at the rate specified in the Basis of Computation
Specified in the Contract; less
(b) The excess, if any, of the Insurance Account Value on such
Monthiversary over the Death Benefit for the Contract
discounted to such Monthiversary at the rate specified in the
Basis of Computations Specified in the Contract.
The cost of insurance rates for the Supplemental Term Insurance Rider will be
equal to the current cost of insurance rates for the Face Amount under
Contract. On each Monthiversary on which the Supplemental Term Insurance
Rider is in force, the Cost of Insurance for the Supplemental Term Insurance
Rider will be added to the Monthly Charges deducted from the Insurance
Account Value.
B-5
<PAGE>
<PAGE>
Termination of the Supplemental Term Insurance Rider
The Supplemental Term Insurance Rider may be terminated as of any
Monthiversary following a written request to the Company. The Supplemental
Term Insurance Rider will terminate automatically when any of the following
events occur:
(a) The lapse of the Contract;
(b) The surrender of the Contract;
(c) The Maturity Date of the Contract;
(d) The Date of Death Upon Which Death Benefits become Payable; or
(e) The Rider Expiry Date.
Reinstatement of Supplemental Term Insurance Rider
If the Supplemental Term Insurance Rider terminates, it may be reinstated
within five years of the earlier of the Contact termination or rider
termination provided that:
(a) If the Contract has terminated, it is also being reinstated;
(b) Satisfactory evidence of insurability is provided to SELIC; and
(c) Any charges due under the rider are paid as of the date of the
Reinstatement.
The charges due will be equal to the amount of the charges for the rider due
and unpaid at the time that the rider terminated, plus three times the
charges for the rider due at the time of Reinstatement.
In order for the rider to be reinstated, the same number of Insureds under
the Contract must be alive as were alive when the rider terminated.
Additional Provisions of the Rider - Incontestability
In order for SELIC to contest the validity of any coverage provided by the
Supplemental Term Insurance Rider, legal action must be commenced within two
years from the rider effective date or from the effective date of any change
in rider coverage requiring evidence of insurability, including Reinstatement
of Coverage.
B-6
<PAGE>
<PAGE>
Additional Provisions of the Rider - Suicide
If the Supplemental Term Insurance Rider is attached to a single life
Contract and the Insured dies by suicide, while sane or insane, within two
years from the rider Effective Date, the death benefit payable will be
limited to the sum of the Cost of Insurance Charges for the rider.
If this rider is attached to a Contract, to which a Joint and Last Survivor
Rider has been added, and either Insured dies by suicide, while sane or
insane, within two years from the rider Effective Date, the Death Benefit
payable will be limited to the sum of the Cost of Insurance Charges for the
rider.
The following are major modifications to a Contract when a Supplemental Term
Insurance Rider is added:
(1) Coverage provided by the Supplemental Term Insurance Rider is not
taken into account in determining the amount of Target
Premium: accordingly there may be no additional Premium Load
associated with this coverage. (See "The Contracts --
Premiums").
(2) In the event that a partial withdrawal results in a decrease in
the Face Amount, which would cause the Face Amount to be less
than the Minimum Face Amount of a Contract, the Supplemental
Term Insurance Amount will be decreased by the amount of the
excess of the withdrawal over the decreased Face Amount. (See
"The Contract -- Surrender and Partial Withdrawals").
(3) The Supplemental Term Insurance Amount will be included in Total
Insurance Coverage in determining whether the Minimum Death
Benefit applies, and is not included in Death Benefit proceeds
when the Death Benefit payable under the Contract is equal to
the Minimum Death Benefit.
B-7
<PAGE>
<PAGE>
APPENDIX C -- ILLUSTRATIONS OF DEATH BENEFITS
AND NET INSURANCE ACCOUNT VALUE
The following illustrations show hypothetically how the Insurance Account
Value and Death Benefit of a Contract change with the investment experience
of the Available Divisions of the Separate Account. The illustrations show
how the Insurance Account Value and Death Benefit of a Contract issued to an
Insured of a given Issue Age and at a given Premium would vary over time if
the investment return on the assets held in each Available Division of the
Separate Account were an assumed uniform, gross, after-tax annual rate of 0%,
6% or 12%. The hypothetical rates of return are illustrative only and should
not be deemed a representation of past or future investment performance. The
illustrations illustrate a Contract issued to a Male, Issue Age 45 in a
nonsmoker rate class assuming Medical Underwriting. The values would be
different from those shown if the gross annual investment rates of return
averaged 0%, 6% or 12% over a period of years, but fluctuated above and below
those averages for individual Contract Years. The actual values will depend
upon various factors, including age, sex, smoking status, and underwriting
status of the Insured.
The Insurance Account Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the assumed rate of return,
reflecting deduction of the maximum mortality and expense risk charge, the
maximum monthly administrative charges, and monthly charges for the cost of
insurance based on the maximum values allowed under the 1980 Commissioners
Standard Ordinary Mortality Table. The Insurance Account Value column under
the "Current" heading shows the accumulated value of the Net Premiums at the
assumed rate of return, reflecting deduction of the current mortality and
expense risk charge, the current monthly administrative charges, and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between illustrations depending
upon whether Death Benefit Option 1, Option 2, or Option 3 is illustrated.
The amounts shown for the Insurance Account Value and Death Benefit reflect
the fact that the investment rate of return is lower than the gross after-tax
return on the assets held in a Division due to the advisory fee and operating
expenses of the Underlying Portfolio (which combined are assumed to be .72%
of aggregate average daily net assets). After deduction for these amounts
and the mortality and expense basis (.35% current, .50% guaranteed) the
illustrated gross annual investment rates of return of 0%, 6% and 12%
correspond to approximate net annual rates of -1.07%, 4.93%, and 10.93%,
respectively, on a current basis, and -1.22%, 4.78%, and 10.78%, respectively,
on a guaranteed basis. The average advisory fee and fund expense reflects any
voluntary expense reimbursement arrangements between the various underlying
funds and their investment advisors. The investment advisors could terminate
these arrangements at any time. If any of these arrangements are terminated,
the above net annual rates of return would be reduced. The
C-1
<PAGE>
<PAGE>
actual investment advisory fee applicable to each Division is shown in the
respective prospectuses for each Underlying Portfolio. These Prospectuses
for the Funds should also be consulted for details about the nature and
extent of expenses for each Underlying Portfolio.
The hypothetical values shown in the illustrations do not reflect any charges
for federal income taxes against the Separate Account, since Security Equity
Life Insurance Company is not currently making any such charges. However,
such charges may be made in the future and, in that event, the gross annual
investment rate of return of the Available Divisions would have to exceed 0%,
6% and 12% by an amount sufficient to cover the charges in order to produce
the Death Benefit and Insurance Account Value illustration. (See "Federal
Tax Matters").
The illustrations illustrate the Contract values that would result based upon
the investment rates of return if Premiums are paid as indicated, if all Net
Premiums are allocated evenly among Available Divisions, and if no Contract
Loans have been made. The illustrations are also based on the assumptions
that the Contract Holder has not requested an increase or decrease in the
Face Amount, that no partial withdrawals have been made, that no transfer
charges were incurred, and that no optional riders have been requested.
Upon request, Security Equity Life Insurance Company will provide a
comparable illustration based upon the proposed Insured's Issue Age, sex and
underwriting class, the Face Amount and Premium pattern requested, and any
available riders requested.
C-2
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 0%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(-1.07% Net) (-1.22% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,072 100,000 769 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 2,586 100,000 1,991 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 4,052 100,000 3,173 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 5,481 100,000 4,317 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 6,877 100,000 5,419 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 8,241 100,000 6,477 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 9,575 100,000 7,488 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 10,881 100,000 8,445 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 12,162 100,000 9,345 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 13,403 100,000 10,180 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 14,664 100,000 10,986 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 15,888 100,000 11,717 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 17,074 100,000 12,370 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 18,209 100,000 12,940 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 19,291 100,000 13,419 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 20,382 100,000 13,875 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 21,408 100,000 14,220 100,000
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 22,370 100,000 14,439 100,000
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 23,270 100,000 14,514 100,000
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 24,110 100,000 14,426 100,000
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 27,126 100,000 10,847 100,000
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 27,404 100,000 - -
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-3
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 6%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(4.93% Net) (4.78% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,140 100,000 828 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 2,819 100,000 2,186 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 4,548 100,000 3,585 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 6,341 100,000 5,027 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 8,204 100,000 6,510 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 10,144 100,000 8,037 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 12,165 100,000 9,603 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 14,272 100,000 11,207 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 16,477 100,000 12,845 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 18,767 100,000 14,516 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 21,208 100,000 16,256 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 23,753 100,000 18,025 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 26,405 100,000 19,824 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 29,160 100,000 21,651 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 32,022 100,000 23,502 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 35,070 100,000 25,457 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 38,236 100,000 27,432 100,000
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 41,533 100,000 29,423 100,000
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 44,973 100,000 31,419 100,000
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 48,570 100,000 33,415 100,000
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 69,157 109,268 43,222 100,000
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 93,847 134,201 51,941 100,000
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-4
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- -----------------------------------------------------------------------------------------
<CAPTION>
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 1: Level Hypothetical Gross Annual Rate of Return: 12%
Male Nonsmoker Age 45 ----------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(10.93% Net) (10.78% Net)
- -----------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,209 100,000 887 100,000
- -----------------------------------------------------------------------------------------
2 46 1,948 4,193 3,061 100,000 2,389 100,000
- -----------------------------------------------------------------------------------------
3 47 1,948 6,448 5,082 100,000 4,029 100,000
- -----------------------------------------------------------------------------------------
4 48 1,948 8,816 7,302 100,000 5,823 100,000
- -----------------------------------------------------------------------------------------
5 49 1,948 11,302 9,748 100,000 7,784 100,000
- -----------------------------------------------------------------------------------------
6 50 1,948 13,913 12,446 100,000 9,930 100,000
- -----------------------------------------------------------------------------------------
7 51 1,948 16,654 15,428 100,000 12,279 100,000
- -----------------------------------------------------------------------------------------
8 52 1,948 19,532 18,725 100,000 14,849 100,000
- -----------------------------------------------------------------------------------------
9 53 1,948 22,554 22,380 100,000 17,662 100,000
- -----------------------------------------------------------------------------------------
10 54 1,948 25,727 26,416 100,000 20,742 100,000
- -----------------------------------------------------------------------------------------
11 55 1,948 29,059 30,943 100,000 24,162 100,000
- -----------------------------------------------------------------------------------------
12 56 1,948 32,557 35,957 100,000 27,918 100,000
- -----------------------------------------------------------------------------------------
13 57 1,948 36,230 41,514 100,000 32,052 100,000
- -----------------------------------------------------------------------------------------
14 58 1,948 40,087 47,672 100,112 36,610 100,000
- -----------------------------------------------------------------------------------------
15 59 1,948 44,137 54,476 111,130 41,646 100,000
- -----------------------------------------------------------------------------------------
16 60 1,948 48,389 62,039 123,457 47,308 100,000
- -----------------------------------------------------------------------------------------
17 61 1,948 52,854 70,355 135,786 53,585 103,418
- -----------------------------------------------------------------------------------------
18 62 1,948 57,542 79,498 149,456 60,439 113,626
- -----------------------------------------------------------------------------------------
19 63 1,948 62,464 89,552 163,879 67,887 124,234
- -----------------------------------------------------------------------------------------
20 64 1,948 67,633 100,602 180,077 75,958 135,965
- -----------------------------------------------------------------------------------------
25 69 1,948 97,621 174,437 275,610 127,534 201,504
- -----------------------------------------------------------------------------------------
30 74 1,948 135,894 291,431 416,746 202,603 289,723
- -----------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-5
<PAGE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ---------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 0%
Male Nonsmoker Age 45 --------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(-1.07% Net) (-1.22% Net)
- ---------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,071 101,071 766 100,766
- ---------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,583 102,583 1,979 101,979
- ---------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,043 104,043 3,149 103,149
- ---------------------------------------------------------------------------------------------
4 48 1,948 8,816 5,463 105,463 4,274 104,274
- ---------------------------------------------------------------------------------------------
5 49 1,948 11,302 6,846 106,846 5,350 105,350
- ---------------------------------------------------------------------------------------------
6 50 1,948 13,913 8,194 108,194 6,376 106,376
- ---------------------------------------------------------------------------------------------
7 51 1,948 16,654 9,507 109,507 7,346 107,346
- ---------------------------------------------------------------------------------------------
8 52 1,948 19,532 10,786 110,786 8,254 108,254
- ---------------------------------------------------------------------------------------------
9 53 1,948 22,554 12,037 112,037 9,094 109,094
- ---------------------------------------------------------------------------------------------
10 54 1,948 25,727 13,239 113,239 9,857 109,857
- ---------------------------------------------------------------------------------------------
11 55 1,948 29,059 14,457 114,457 10,578 110,578
- ---------------------------------------------------------------------------------------------
12 56 1,948 32,557 15,629 115,629 11,208 111,208
- ---------------------------------------------------------------------------------------------
13 57 1,948 36,230 16,754 116,754 11,745 111,745
- ---------------------------------------------------------------------------------------------
14 58 1,948 40,087 17,814 117,814 12,183 112,183
- ---------------------------------------------------------------------------------------------
15 59 1,948 44,137 18,806 118,806 12,510 112,510
- ---------------------------------------------------------------------------------------------
16 60 1,948 48,389 19,787 119,787 12,794 112,794
- ---------------------------------------------------------------------------------------------
17 61 1,948 52,854 20,681 120,681 12,943 112,943
- ---------------------------------------------------------------------------------------------
18 62 1,948 57,542 21,489 121,489 12,943 112,943
- ---------------------------------------------------------------------------------------------
19 63 1,948 62,464 22,211 122,211 12,772 112,772
- ---------------------------------------------------------------------------------------------
20 64 1,948 67,633 22,849 122,849 12,411 112,411
- ---------------------------------------------------------------------------------------------
25 69 1,948 97,621 24,374 124,374 7,169 107,169
- ---------------------------------------------------------------------------------------------
30 74 1,948 135,894 22,074 122,074 - -
- ---------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-6
<PAGE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ---------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 6%
Male Nonsmoker Age 45 --------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(4.93% Net) (4.78% Net)
- ---------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,140 101,140 824 100,824
- ---------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,815 102,815 2,174 102,174
- ---------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,538 104,538 3,557 103,557
- ---------------------------------------------------------------------------------------------
4 48 1,948 8,816 6,320 106,320 4,976 104,976
- ---------------------------------------------------------------------------------------------
5 49 1,948 11,302 8,167 108,167 6,426 106,426
- ---------------------------------------------------------------------------------------------
6 50 1,948 13,913 10,084 110,084 7,908 107,908
- ---------------------------------------------------------------------------------------------
7 51 1,948 16,654 12,074 112,074 9,415 109,415
- ---------------------------------------------------------------------------------------------
8 52 1,948 19,532 14,143 114,143 10,942 110,942
- ---------------------------------------------------------------------------------------------
9 53 1,948 22,554 16,297 116,297 12,483 112,483
- ---------------------------------------------------------------------------------------------
10 54 1,948 25,727 18,523 118,523 14,030 114,030
- ---------------------------------------------------------------------------------------------
11 55 1,948 29,059 20,887 120,887 15,617 115,617
- ---------------------------------------------------------------------------------------------
12 56 1,948 32,557 23,336 123,336 17,196 117,196
- ---------------------------------------------------------------------------------------------
13 57 1,948 36,230 25,868 125,868 18,762 118,762
- ---------------------------------------------------------------------------------------------
14 58 1,948 40,087 28,472 128,472 20,308 120,308
- ---------------------------------------------------------------------------------------------
15 59 1,948 44,137 31,145 131,145 21,819 121,819
- ---------------------------------------------------------------------------------------------
16 60 1,948 48,389 33,952 133,952 23,362 123,362
- ---------------------------------------------------------------------------------------------
17 61 1,948 52,854 36,818 136,818 24,846 124,846
- ---------------------------------------------------------------------------------------------
18 62 1,948 57,542 39,747 139,747 26,247 126,247
- ---------------------------------------------------------------------------------------------
19 63 1,948 62,464 42,741 142,741 27,540 127,540
- ---------------------------------------------------------------------------------------------
20 64 1,948 67,633 45,803 145,803 28,696 128,696
- ---------------------------------------------------------------------------------------------
25 69 1,948 97,621 61,795 161,795 31,461 131,461
- ---------------------------------------------------------------------------------------------
30 74 1,948 135,894 77,835 177,835 25,048 125,048
- ---------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-7
<PAGE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ----------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 2: Return of Account Value Hypothetical Gross Annual Rate of Return: 12%
Male Nonsmoker Age 45 ---------------------------------------------
Annual Premium: $1,948 Current Guaranteed
(10.93% Net) (10.78% Net)
- ----------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,208 101,208 883 100,883
- ----------------------------------------------------------------------------------------------
2 46 1,948 4,193 3,057 103,057 2,375 102,375
- ----------------------------------------------------------------------------------------------
3 47 1,948 6,448 5,070 105,070 3,998 103,998
- ----------------------------------------------------------------------------------------------
4 48 1,948 8,816 7,277 107,277 5,762 105,762
- ----------------------------------------------------------------------------------------------
5 49 1,948 11,302 9,702 109,702 7,680 107,680
- ----------------------------------------------------------------------------------------------
6 50 1,948 13,913 12,370 112,370 9,765 109,765
- ----------------------------------------------------------------------------------------------
7 51 1,948 16,654 15,309 115,309 12,029 112,029
- ----------------------------------------------------------------------------------------------
8 52 1,948 19,532 18,547 118,547 14,483 114,483
- ----------------------------------------------------------------------------------------------
9 53 1,948 22,554 22,124 122,124 17,141 117,141
- ----------------------------------------------------------------------------------------------
10 54 1,948 25,727 26,055 126,055 20,015 120,015
- ----------------------------------------------------------------------------------------------
11 55 1,948 29,059 30,447 130,447 23,165 123,165
- ----------------------------------------------------------------------------------------------
12 56 1,948 32,557 35,285 135,285 26,569 126,569
- ----------------------------------------------------------------------------------------------
13 57 1,948 36,230 40,614 140,614 30,249 130,249
- ----------------------------------------------------------------------------------------------
14 58 1,948 40,087 46,471 146,471 34,226 134,226
- ----------------------------------------------------------------------------------------------
15 59 1,948 44,137 52,907 152,907 38,521 138,521
- ----------------------------------------------------------------------------------------------
16 60 1,948 48,389 60,051 160,051 43,241 143,241
- ----------------------------------------------------------------------------------------------
17 61 1,948 52,854 67,894 167,894 48,331 148,331
- ----------------------------------------------------------------------------------------------
18 62 1,948 57,542 76,514 176,514 53,812 153,812
- ----------------------------------------------------------------------------------------------
19 63 1,948 62,464 85,994 185,994 59,704 159,704
- ----------------------------------------------------------------------------------------------
20 64 1,948 67,633 96,429 196,429 66,028 166,028
- ----------------------------------------------------------------------------------------------
25 69 1,948 97,621 166,496 266,496 105,134 205,134
- ----------------------------------------------------------------------------------------------
30 74 1,948 135,894 278,600 398,399 159,083 259,083
- ----------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-8
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 3: Hypothetical Gross Annual Rate of Return: 0%
Return of Premium @ 0% ---------------------------------------------
Male Nonsmoker Age 45 Current Guaranteed
Annual Premium: $1,948 (-1.07% Net) (-1.22% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,071 101,948 763 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,581 103,896 1,970 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,039 105,844 3,131 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 5,456 107,792 4,242 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 6,834 109,740 5,300 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 8,175 111,688 6,303 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 9,479 113,636 7,242 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 10,748 115,584 8,110 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 11,985 117,532 8,899 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 13,171 119,480 9,600 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 14,368 121,428 10,240 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 15,516 123,376 10,773 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 16,611 125,324 11,188 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 17,634 127,272 11,477 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 18,578 129,220 11,622 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 19,500 131,168 11,682 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 20,319 133,116 11,560 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 21,036 135,064 11,228 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 21,647 137,012 10,650 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 22,152 138,960 9,788 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 22,461 148,700 - -
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 17,034 158,440 - -
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-9
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 3: Hypothetical Gross Annual Rate of Return: 6%
Return of Premium @ 0% ---------------------------------------------
Male Nonsmoker Age 45 Current Guaranteed
Annual Premium: $1,948 (4.93% Net) (4.78% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,139 101,948 821 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 2,814 103,896 2,165 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 4,534 105,844 3,540 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 6,313 107,792 4,946 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 8,157 109,740 6,379 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 10,070 111,688 7,840 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 12,056 113,636 9,321 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 14,119 115,584 10,815 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 16,269 117,532 12,316 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 18,489 119,480 13,815 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 20,849 121,428 15,344 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 23,294 123,376 16,853 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 25,824 125,324 18,336 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 28,428 127,272 19,783 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 31,106 129,220 21,176 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 33,924 131,168 22,580 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 36,809 133,116 23,897 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 39,767 135,064 25,100 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 42,803 137,012 26,154 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 45,924 138,960 27,020 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 62,636 148,700 26,943 148,700
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 80,892 158,440 11,234 158,440
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-10
<PAGE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
SECURITY EQUITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
- ------------------------------------------------------------------------------------------
Contract Face Amount: $100,000 For Separate Account 13
Death Benefit Option 3: Hypothetical Gross Annual Rate of Return: 12%
Return of Premium @ 0% ---------------------------------------------
Male Nonsmoker Age 45 Current Guaranteed
Annual Premium: $1,948 (10.93% Net) (10.78% Net)
- ------------------------------------------------------------------------------------------
Age @ Premium
Policy Beginning Annual Accum Cash Death Cash Death
Year of Year Premium @ 5% Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 45 1,948 2,045 1,208 101,948 880 101,948
- ------------------------------------------------------------------------------------------
2 46 1,948 4,193 3,055 103,896 2,367 103,896
- ------------------------------------------------------------------------------------------
3 47 1,948 6,448 5,067 105,844 3,981 105,844
- ------------------------------------------------------------------------------------------
4 48 1,948 8,816 7,272 107,792 5,734 107,792
- ------------------------------------------------------------------------------------------
5 49 1,948 11,302 9,696 109,740 7,638 109,740
- ------------------------------------------------------------------------------------------
6 50 1,948 13,913 12,364 111,688 9,707 111,688
- ------------------------------------------------------------------------------------------
7 51 1,948 16,654 15,304 113,636 11,953 113,636
- ------------------------------------------------------------------------------------------
8 52 1,948 19,532 18,547 115,584 14,389 115,584
- ------------------------------------------------------------------------------------------
9 53 1,948 22,554 22,133 117,532 17,029 117,532
- ------------------------------------------------------------------------------------------
10 54 1,948 25,727 26,082 119,480 19,890 119,480
- ------------------------------------------------------------------------------------------
11 55 1,948 29,059 30,501 121,428 23,033 121,428
- ------------------------------------------------------------------------------------------
12 56 1,948 32,557 35,382 123,376 26,442 123,376
- ------------------------------------------------------------------------------------------
13 57 1,948 36,230 40,774 125,324 30,146 125,324
- ------------------------------------------------------------------------------------------
14 58 1,948 40,087 46,725 127,272 34,174 127,272
- ------------------------------------------------------------------------------------------
15 59 1,948 44,137 53,298 129,220 38,558 129,220
- ------------------------------------------------------------------------------------------
16 60 1,948 48,389 60,641 131,168 43,423 131,168
- ------------------------------------------------------------------------------------------
17 61 1,948 52,854 68,765 133,116 48,735 133,116
- ------------------------------------------------------------------------------------------
18 62 1,948 57,542 77,743 146,156 54,542 135,064
- ------------------------------------------------------------------------------------------
19 63 1,948 62,464 87,617 160,339 60,901 137,012
- ------------------------------------------------------------------------------------------
20 64 1,948 67,633 98,470 176,262 67,880 138,960
- ------------------------------------------------------------------------------------------
25 69 1,948 97,621 170,991 270,167 114,471 180,864
- ------------------------------------------------------------------------------------------
30 74 1,948 135,894 285,908 408,848 182,980 261,661
- ------------------------------------------------------------------------------------------
</TABLE>
Current values reflect investment results using current mortality and
expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
Guaranteed values reflect investment results using guaranteed mortality
and expense risk charges, monthly administrative charges, and cost of
insurance rates for the exact combination of premiums and benefits
shown.
If no Cash Value or Death Benefit is shown, the Contract would lapse
under the assumptions used. Additional premium payments would be
required to keep the Contract in force.
The hypothetical investment rate of return shown is illustrative only,
and should not be deemed a representation of past or future results.
Actual investment results may be more or less than those shown and will
depend on a number of factors, including the investment allocation made
by the Contract Holder and the investment results for the Underlying
Portfolios. The Cash Value and Death Benefit for a Contract would be
different from those shown if the actual rates of return averaged the
rate shown over a period of years, but also fluctuated above or below
that average for individual Contract Years. No representation can be
made by SELIC, Walnut Street Securities, the Underlying Portfolios,
their various investment managers, or any representative thereof, that
this hypothetical rate of return can be achieved for any one year, or
sustained over any period of time.
Illustrated values shown above are as of the end of the Contract Years
indicated and assume any additional premiums shown are received on the
Contract Anniversaries.
C-11
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Financial Statements and Schedule
December 31, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company
and Policyholders of Security Equity
Life Insurance Company Separate Account Thirteen:
We have audited the statement of net assets and liabilities, including
the schedule of investments, of the General American Capital Company
Money Market Fund, Wells Fargo Bank LAP Asset Allocation Fund, Wells
Fargo Bank LAP US Government Allocation Fund, Fidelity VIP Growth Fund,
Fidelity VIP II Investment Grade Bond Fund, Fidelity VIP II Asset
Manager Fund, Fidelity VIP II Index 500 Fund, Fidelity VIP Overseas
Fund, Fidelity VIP High Income Fund, Evergreen VA Fund, Evergreen VA
Foundation Fund, Evergreen VA Growth and Income Fund, Russell Multi-
Style Equity Fund, Russell Aggressive Equity Fund, Russell Non-US Fund,
and the Russell Core Bond Fund Divisions of Security Equity Life
Insurance Company Separate Account Thirteen as of December 31, 1998, and
the related statements of operations and changes in net assets for the
periods presented. These financial statements are the responsibility of
the management of Security Equity Life Insurance Company Separate
Account Thirteen. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
investments owned at December 31, 1998 by correspondence with underlying
Mutual Funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the General
American Capital Company Money Market Fund, Wells Fargo Bank LAP Asset
Allocation Fund, Wells Fargo Bank LAP US Government Allocation Fund,
Fidelity VIP Growth Fund, Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Asset Manager Fund, Fidelity VIP II Index 500 Fund,
Fidelity VIP Overseas Fund, Fidelity VIP High Income Fund, Evergreen VA
Fund, Evergreen VA Foundation Fund, Evergreen VA Growth and Income Fund,
Russell Multi-Style Equity Fund, Russell Aggressive Equity Fund, Russell
Non-US Fund, and the Russell Core Bond Fund Divisions of Security Equity
Life Insurance Company Separate Account Thirteen as of December 31,
1998, the results of their operations and the changes in their net
assets for the periods presented, in conformity with generally accepted
accounting principles.
St. Louis, Missouri
February 19, 1999
1
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Net Assets and Liabilities
December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets:
Investments at
market value $21,402,310 36,048 5,929,959 5,791,750 491,407
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 684 4 567 474 --
----------- ------ --------- --------- -------
Total net assets $21,401,626 36,044 5,929,392 5,791,276 491,407
=========== ====== ========= ========= =======
Total units $17,157,817 17,147 2,144,953 4,131,714 271,823
=========== ====== ========= ========= =======
Unit value $ 1.25 2.10 2.76 1.40 1.81
=========== ====== ========= ========= =======
Cost of investments $22,293,002 33,809 4,099,726 5,441,080 456,493
=========== ====== ========= ========= =======
<CAPTION>
Evergreen
Fidelity Evergreen VA
Index Evergreen VA Growth Fidelity
500 VA Foundation and Income Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets:
Investments at
market value 12,242,963 5,200,464 3,687,313 4,460,853 1,009,262
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 1,173 496 352 425 89
---------- --------- --------- --------- ---------
Total net assets 12,241,790 5,199,968 3,686,961 4,460,428 1,009,173
========== ========= ========= ========= =========
Total units 4,281,894 3,236,510 2,294,744 2,837,410 811,253
========== ========= ========= ========= =========
Unit value 2.86 1.61 1.61 1.57 1.24
========== ========= ========= ========= =========
Cost of investments 9,226,920 4,043,664 3,071,644 3,282,324 967,203
========== ========= ========= ========= =========
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at
market value 305,292 63 162,016 152,589 162,240 45,422
Liabilities:
Payable to Security
Equity Life Insur-
ance Company 26 74 32 19 22 9
------- --- ------- ------- ------- ------
Total net assets 305,266 (11) 161,984 152,570 162,218 45,413
======= === ======= ======= ======= ======
Total units 274,990 -- 122,130 136,818 161,905 40,710
======= === ======= ======= ======= ======
Unit value 1.11 N/A 1.32 1.11 1.00 1.11
======= === ======= ======= ======= ======
Cost of investments 329,431 63 125,101 142,888 155,696 43,327
======= === ======= ======= ======= ======
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ -- 688 22,166 200,235 --
Expenses:
Mortality and expense
charge 22,095 97 18,814 15,984 --
---------- ----- --------- ------- ------
Net investment income
(expense) (22,095) 591 3,352 184,251 --
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments:
Proceeds from sales 3,898,147 637 103,089 140,408 10,922
Cost of investments sold 2,753,110 589 78,050 133,728 11,038
---------- ----- --------- ------- ------
Realized gain (loss)
on sales 1,145,037 48 25,039 6,680 (116)
Realized gain (loss) on
distributions -- 2,809 579,805 23,757 --
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments 1,145,037 2,857 604,844 30,437 (116)
---------- ----- --------- ------- ------
Net realized gain (loss) on
investments:
Beginning of period (54,627) (531) 766,965 191,164 --
End of period (890,692) 2,239 1,830,233 350,670 34,914
---------- ----- --------- ------- ------
Net unrealized gain (loss) on
investments (836,065) 2,770 1,063,268 159,506 34,914
---------- ----- --------- ------- ------
Net gain (loss) on investments 308,972 5,627 1,668,112 189,943 34,798
---------- ----- --------- ------- ------
Net increase in net assets
Resulting from operations $ 286,877 6,218 1,671,464 374,194 34,798
========== ===== ========= ======= ======
<PAGE>
<CAPTION>
Evergreen
Fidelity Evergreen VA
Index Evergreen VA Growth Fidelity
500 VA Foundation and Income Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 88,190 -- 64,531 35,778 2,542
Expenses:
Mortality and expense
charge 35,124 16,661 12,664 15,733 1,700
--------- --------- ------- --------- ------
Net investment income
(expense) 53,066 (16,661) 51,867 20,045 842
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments:
Proceeds from sales 308,101 91,677 72,454 74,834 18,220
Cost of investments sold 195,424 61,931 51,822 50,376 18,141
--------- --------- ------- --------- ------
Realized gain (loss)
on sales 112,677 29,746 20,632 24,458 79
Realized gain (loss) on
distributions 204,265 163,674 57,201 84,677 7,491
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments 316,942 193,420 77,833 109,135 7,570
--------- --------- ------- --------- ------
Net realized gain (loss) on
investments:
Beginning of period 1,017,506 1,039,772 400,773 1,117,994 (3,307)
End of period 3,016,043 1,156,800 615,669 1,178,529 42,058
--------- --------- ------- --------- ------
Net unrealized gain (loss) on
investments 1,998,537 117,028 214,896 60,535 45,365
--------- --------- ------- --------- ------
Net gain (loss) on investments 2,315,479 310,448 292,729 169,670 52,935
--------- --------- ------- --------- ------
Net increase in net assets
Resulting from operations 2,368,545 293,787 344,596 189,715 53,777
========= ========= ======= ========= ======
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income 12,158 47,335 854 62 1,074 1,956
Expenses:
Mortality and expense
charge 1,035 3,810 481 196 258 142
------- --------- ------ ----- ------ -----
Net investment income
(expense) 11,123 43,525 373 (134) 816 1,814
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments:
Proceeds from sales 4,566 1,135,456 1,604 566 786 500
Cost of investments sold 4,545 1,132,889 1,413 553 840 484
------- --------- ------ ----- ------ -----
Realized gain (loss)
on sales 21 2,567 191 13 (54) 16
Realized gain (loss) on
distributions 7,725 17,464 2,724 2,987 305 218
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments 7,746 20,031 2,915 3,000 251 234
------- --------- ------ ----- ------ -----
Net realized gain (loss) on
investments:
Beginning of period 13,921 6,901 4,376 4,467 (7,291) 1,144
End of period (24,139) -- 36,915 9,701 6,544 2,095
------- --------- ------ ----- ------ -----
Net unrealized gain (loss) on
investments (38,060) (6,901) 32,539 5,234 13,835 951
------- --------- ------ ----- ------ -----
Net gain (loss) on investments (30,314) 13,130 35,454 8,234 14,086 1,185
------- --------- ------ ----- ------ -----
Net increase in net assets
Resulting from operations (19,191) 56,655 35,827 8,100 14,902 2,999
======= ========= ====== ===== ====== =====
See accompanying notes to financial statements.
</TABLE>
3 <PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1997
<CAPTION>
General Wells Wells Fidelity
American Fargo Fargo VIP II
Capital Bank Bank Invest-
Company LAP LAP US Fidelity ment
Money Asset Government VIP Grade
Market Allocation Allocation Growth Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ - 798 29,147 27,119 225,803
Expense:
Mortality and expense
charges 8,153 57 1,790 16,100 13,854
----------- ----- ------ ------- -------
Net investment income
(expense) (8,153) 741 27,357 11,019 211,949
----------- ----- ------ ------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 20,629,339 510 11,595 675,710 235,810
Cost of investments sold 21,128,960 503 11,537 522,627 229,902
----------- ----- ------ ------- -------
Net realized gain
(loss) on sales (499,621) 7 58 153,083 5,908
Realized gain from
distributions 70,508 1,992 1,636 121,391 -
----------- ----- ------ ------- -------
Net realized gain
(loss) on
investments (429,113) 1,999 1,694 274,474 5,908
----------- ----- ------ ------- -------
Net unrealized gain (loss)
on investments:
Beginning of period (616,614) (727) - 152,534 72,512
End of period (54,627) (531) 6,901 766,965 191,164
----------- ----- ------ ------- -------
Net unrealized gain
(loss) on
investments 561,987 196 6,901 614,431 118,652
----------- ----- ------ ------- -------
Net gain (loss)
on investments 132,874 2,195 8,595 888,905 124,560
----------- ----- ------ ------- -------
Net increase (decrease)
in net assets
resulting from
operations $ 124,721 2,936 35,952 899,924 336,509
=========== ===== ====== ======= =======
<PAGE>
<CAPTION>
Fidelity Evergreen
Fidelity Fidelity VIP VA
VIP II VIP High Evergreen Founda-
Index 500 Overseas Income VA tion
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 39,357 3,584 - 14,086 56,929
Expense:
Mortality and expense
charges 20,225 918 322 15,760 10,793
--------- ------- ------ --------- -------
Net investment income
(expense) 19,132 2,666 (322) (1,674) 46,136
--------- ------- ------ --------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 1,153,694 228,191 2,086 1,142,113 718,799
Cost of investments sold 803,888 224,866 2,056 830,948 530,813
--------- ------- ------ --------- -------
Net realized gain
(loss) on sales 349,806 3,325 30 311,165 187,986
Realized gain from
distributions 79,863 14,229 - 192,033 159,412
--------- ------- ------ --------- -------
Net realized gain
(loss) on
investments 429,669 17,554 30 503,198 347,398
--------- ------- ------ --------- -------
Net unrealized gain (loss)
on investments:
Beginning of period 190,361 - - 174,857 90,314
End of period 1,017,506 (3,307) 13,921 1,039,772 400,773
--------- ------- ------ --------- -------
Net unrealized gain
(loss) on
investments 827,145 (3,307) 13,921 864,915 310,459
--------- ------- ------ --------- -------
Net gain (loss)
on investments 1,256,814 14,247 13,951 1,368,113 657,857
--------- ------- ------ --------- -------
Net increase (decrease)
in net assets
resulting from
operations 1,275,946 16,913 13,629 1,366,439 703,993
========= ======= ====== ========= =======
<PAGE>
<CAPTION>
Evergreen
VA Russell Russell
Growth Multi- Aggres- Russell
and Style sive Russell Core
Income Equity Equity Non-US Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income 19,339 186 - - 628
Expense:
Mortality and expense
charges 14,415 193 67 93 65
--------- ----- ----- ------ -----
Net investment income
(expense) 4,924 (7) (67) (93) 563
--------- ----- ----- ------ -----
Net realized gain (loss) on
investments:
Proceeds from sales 510,045 612 215 306 204
Cost of investments sold 361,276 603 201 334 202
--------- ----- ----- ------ -----
Net realized gain
(loss) on sales 148,769 9 14 (28) 2
Realized gain from
distributions 152,804 - - - -
--------- ----- ----- ------ -----
Net realized gain
(loss) on
investments 301,573 9 14 (28) 2
--------- ----- ----- ------ -----
Net unrealized gain (loss)
on investments:
Beginning of period 218,007 - - - -
End of period 1,117,994 4,376 4,467 (7,291) 1,144
--------- ----- ----- ------ -----
Net unrealized gain
(loss) on
investments 899,987 4,376 4,467 (7,291) 1,144
--------- ----- ----- ------ -----
Net gain (loss)
on investments 1,201,560 4,385 4,481 (7,319) 1,146
--------- ----- ----- ------ -----
Net increase (decrease)
in net assets
resulting from
operations 1,206,484 4,378 4,414 (7,412) 1,709
========= ===== ===== ====== =====
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Operations
Year ended December 31, 1996
<CAPTION>
General Wells
American Fargo Fidelity Evergreen
Capital Bank VIP II Evergreen VA
Company LAP Fidelity Investment Fidelity VA Growth
Money Asset VIP Grade VIP II Evergreen Founda- and
Market Allocation Growth Bond Index 500 VA tion Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ - 348 98 6,207 1,888 14,947 25,649 16,722
Expense:
Mortality and expense charges 8,455 19 9,716 6,971 5,182 2,914 1,512 2,926
---------- ---- --------- ------- ------- ------- ------- -------
Net investment income (expense) (8,455) 329 (9,618) (764) (3,294) 12,033 24,137 13,796
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss) on
investments:
Proceeds from sales 9,427,292 545 2,657,607 964,149 996,124 34,167 17,279 36,201
Cost of investments sold 9,821,858 577 2,601,002 967,181 961,682 32,848 16,419 34,638
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on Sales (394,566) (32) 56,605 (3,032) 34,442 1,319 860 1,563
Realized gain from
distributions 662,558 565 2,483 - 4,854 8,720 8,970 4,256
---------- ---- --------- ------- ------- ------- ------- -------
Net realized gain (loss)
on Investments 267,992 533 59,088 (3,032) 39,296 10,039 9,830 5,819
---------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain (loss)
on investments:
Beginning of period (477,414) (264) (141) - - - - -
End of period (616,614) (727) 152,534 72,512 190,361 174,857 90,314 218,007
---------- ---- --------- ------- ------- ------- ------- -------
Net unrealized gain
(loss) on investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
---------- ---- --------- ------- ------- ------- ------- -------
Net gain on
Investments 128,792 70 211,763 69,480 229,657 184,896 100,144 223,826
---------- ---- --------- ------- ------- ------- ------- -------
Net increase in net
assets resulting from
operations $ 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
========== ==== ========= ======= ======= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1998
<CAPTION>
General LAP
American Trust Fidelity
Money Asset Fidelity Fidelity Inv. Asset
Market Allocation Growth Grade Bond Manager
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) $ (22,095) 591 3,352 184,251 --
Net realized gain (loss) on
investments 1,145,037 2,857 604,844 30,437 (116)
Net unrealized gain (loss) on
investments (836,065) 2,770 1,063,268 159,506 34,914
----------- ------ --------- --------- -------
Net increase (decrease) in
net assets resulting from
operations 286,877 6,218 1,671,464 374,194 34,798
----------- ------ --------- --------- -------
Deposits into Separate Account 24,041,771 8,593 6,194 173,887 --
Withdrawals from Separate
Account (3,248) -- (11,274) (39,907) --
Transfers to (from) Divisions (4,017,154) -- -- 1,104,791 467,531
Policy charges (1,197,941) (1,516) (73,715) (94,401) (10,922)
----------- ------ --------- --------- -------
Net deposits into (with-
drawals from) Separate
Account 18,823,428 7,077 (78,795) 1,144,370 456,609
----------- ------ --------- --------- -------
Increase (decrease) in net assets 19,110,305 13,295 1,592,669 1,518,564 491,407
Net assets, beginning of period 2,291,321 22,749 4,336,723 4,272,712 --
----------- ------ --------- --------- -------
Net assets, end of period $21,401,626 36,044 5,929,392 5,791,276 491,407
=========== ====== ========= ========= =======
<CAPTION>
Fidelity Evergreen Evergreen
Index Evergreen VA VA Fidelity
500 VA Foundation Growth Overseas
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) 53,066 (16,661) 51,867 20,045 842
Net realized gain (loss) on
investments 316,942 193,420 77,833 109,135 7,570
Net unrealized gain (loss) on
investments 1,998,537 117,028 214,896 60,535 45,365
---------- --------- --------- --------- ---------
Net increase (decrease) in
net assets resulting from
operations 2,368,545 293,787 344,596 189,715 53,777
---------- --------- --------- --------- ---------
Deposits into Separate Account 798,465 -- -- 500 133,756
Withdrawals from Separate
Account (75,108) -- -- -- (2,393)
Transfers to (from) Divisions 1,972,578 674,306 -- 1,373 713,408
Policy charges (230,998) (74,855) (59,622) (58,890) (17,803)
---------- --------- --------- --------- ---------
Net deposits into (with-
drawals from) Separate
Account 2,464,937 599,451 (59,622) (57,017) 826,968
---------- --------- --------- --------- ---------
Increase (decrease) in net assets 4,833,482 893,238 284,974 132,698 880,745
Net assets, beginning of period 7,408,308 4,306,730 3,401,987 4,327,730 128,428
---------- --------- --------- --------- ---------
Net assets, end of period 12,241,790 5,199,968 3,686,961 4,460,428 1,009,173
========== ========= ========= ========= =========
<PAGE>
<CAPTION>
LAP Trust
Fidelity US Govt. Russell Russell Russell Russell
High Income Allocation Multi-Style Aggr. Equity Non-US Core Bond
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) 11,123 43,525 373 (134) 816 1,814
Net realized gain (loss) on
investments 7,746 20,031 2,915 3,000 251 234
Net unrealized gain (loss) on
investments (38,060) (6,901) 32,539 5,324 13,835 951
------- ---------- ------- ------- ------- ------
Net increase (decrease) in
net assets resulting from
operations (19,191) 56,655 35,827 8,100 14,902 2,999
------- ---------- ------- ------- ------- ------
Deposits into Separate Account 161,010 -- -- -- -- --
Withdrawals from Separate Account (2,863) -- -- -- -- --
Transfers to (from) Divisions 1,527 (1,104,624) -- 99,341 86,923 --
Policy charges (7,210) (26,931) (1,137) (381) (541) (360)
------- ---------- ------- ------- ------- ------
Net deposits into (with-
drawals from) Separate
Account 152,464 (1,131,555) (1,137) 98,960 86,382 (360)
------- ---------- ------- ------- ------- ------
Increase (decrease) in net assets 133,273 (1,074,900) 34,690 107,060 101,284 2,639
Net assets, beginning of period 171,993 1,074,889 127,294 45,510 60,934 42,774
------- ---------- ------- ------- ------- ------
Net assets, end of period 305,266 (11) 161,984 152,570 162,218 45,413
======= ========== ======= ======= ======= ======
See accompanying notes to financial statements.
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1997
<CAPTION>
General Wells Wells Fidelity
American Fargo Fargo VIP II
Capital Bank Bank Invest-
Company L&A L&A US Fidelity ment
Money Asset Government VIP Grade
Market Allocation Allocation Growth Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) $ (8,153) 741 27,357 11,019 211,949
Net realized gain (loss)
on investments (429,113) 1,999 1,694 274,474 5,908
Net unrealized gain
(loss) on
investments 561,987 196 6,901 614,431 118,652
------------ ------ --------- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations 124,721 2,936 35,952 899,924 336,509
------------ ------ --------- --------- ---------
Deposits into Separate
Account 8,313,213 8,594 - 52,684 187,438
Withdrawals from
Separate Account (12,409,728) - - (521,876) (78,701)
Transfers to (from)
Divisions (8,186,180) - 1,047,944 464,587 247,811
Policy charges (536,474) (1,267) (9,007) (134,854) (134,974)
------------ ------ --------- --------- ---------
Net deposits into
(withdrawals from)
Separate Account (12,819,169) 7,327 1,038,937 (139,459) 221,574
------------ ------ --------- --------- ---------
Increase (decrease) in
net assets (12,694,448) 10,263 1,074,889 760,465 558,083
------------ ------ --------- --------- ---------
Net assets, beginning of
period 14,985,769 12,486 - 3,576,258 3,714,629
------------ ------ --------- --------- ---------
Net assets, end of period $ 2,291,321 22,749 1,074,889 4,336,723 4,272,712
============ ====== ========= ========= =========
<PAGE>
<CAPTION>
Fidelity Evergreen
Fidelity Fidelity VIP VA
VIP II VIP High Evergreen Founda-
Index 500 Overseas Income VA tion
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) 19,132 2,666 (322) (1,674) 46,136
Net realized gain (loss)
on investments 429,669 17,554 30 503,198 347,398
Net unrealized gain
(loss) on
investments 827,145 (3,307) 13,921 864,915 310,459
--------- -------- ------- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations 1,275,946 16,913 13,629 1,366,439 703,993
--------- -------- ------- --------- ---------
Deposits into Separate
Account 238,135 1,137 1,364 - -
Withdrawals from
Separate Account (935,770) (212,942) - (600,093) (615,829)
Transfers to (from)
Divisions 4,375,652 337,545 157,274 90,397 1,589,962
Policy charges (186,389) (14,225) (274) (126,744) (90,084)
--------- -------- ------- --------- ---------
Net deposits into
(withdrawals from)
Separate Account 3,491,628 111,515 158,364 (636,440) 884,049
--------- -------- ------- --------- ---------
Increase (decrease) in
net assets 4,767,574 128,428 171,993 729,999 1,588,042
Net assets, beginning of
period 2,640,734 - - 3,576,731 1,813,945
--------- -------- ------- --------- ---------
Net assets, end of period 7,408,308 128,428 171,993 4,306,730 3,401,987
========= ======== ======= ========= =========
<PAGE>
<CAPTION>
Evergreen
VA Russell Russell
Growth Multi- Aggres- Russell
and Style sive Russell Core
Income Equity Equity Non-US Bond
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
(expense) 4,924 (7) (67) (93) 563
Net realized gain (loss)
on investments 301,573 9 14 (28) 2
Net unrealized gain
(loss) on
investments 899,987 4,376 4,467 (7,291) 1,144
--------- ------- ------ ------ ------
Net increase
(decrease) in net
assets resulting
from operations 1,206,484 4,378 4,414 (7,412) 1,709
--------- ------- ------ ------ ------
Deposits into Separate
Account - - - - -
Withdrawals from
Separate Account - - - - -
Transfers to (from)
Divisions (400,000) 123,754 41,251 68,752 41,251
Policy charges (96,118) (838) (155) (406) (186)
--------- ------- ------ ------ ------
Net deposits into
(withdrawals from)
Separate Account (496,118) 122,916 41,096 68,346 41,065
--------- ------- ------ ------ ------
Increase (decrease) in
net assets 710,366 127,294 45,510 60,934 42,774
Net assets, beginning of
period 3,617,364 - - - -
--------- ------- ------ ------ ------
Net assets, end of period 4,327,730 127,294 45,510 60,934 42,774
========= ======= ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Statement of Changes in Net Assets
Year ended December 31, 1996
<CAPTION>
General Wells
American Fargo Fidelity Evergreen
Capital Bank VIP II Evergreen VA
Company LAP Fidelity Investment Fidelity VA Growth
Money Asset VIP Grade VIP II Evergreen Founda- and
Market Allocation Growth Bond Index 500 VA tion Income
Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income
(expense) $ (8,455) 329 (9,618) (764) (3,294) 12,033 24,137 13,796
Net realized gain (loss)
on investments 267,992 533 59,088 (3,032) 39,296 10,039 9,830 5,819
Net unrealized gain (loss)
on investments (139,200) (463) 152,675 72,512 190,361 174,857 90,314 218,007
----------- ------ --------- --------- --------- --------- --------- ---------
Net increase in net
assets resulting
from operations 120,337 399 202,145 68,716 226,363 196,929 124,281 237,622
----------- ------ --------- --------- --------- --------- --------- ---------
Deposits into Separate Account 16,201,970 6,223 1,854,129 1,992,244 1,139,931 1,799,979 899,908 1,799,969
Transfers to (from) Divisions (9,318,249) 3,087 1,757,397 1,878,412 1,439,294 1,696,024 848,012 1,696,024
Policy charges (864,845) (1,318) (241,335) (224,743) (164,854) (116,201) (58,256) (116,251)
----------- ------ --------- --------- --------- --------- --------- ---------
Net deposits into
Separate Account 6,018,876 7,992 3,370,191 3,645,913 2,414,371 3,379,802 1,689,664 3,379,742
----------- ------ --------- --------- --------- --------- --------- ---------
Increase in net assets 6,139,213 8,391 3,572,336 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
Net assets, beginning of period 8,846,556 4,095 3,922 - - - - -
----------- ------ --------- --------- --------- --------- --------- ---------
Net assets, end of period $14,985,769 12,486 3,576,258 3,714,629 2,640,734 3,576,731 1,813,945 3,617,364
=========== ====== ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
December 31, 1998
(1) Organization
------------
Security Equity Life Insurance Company Separate Account Thirteen
(the Separate Account) commenced operations on November 15,
1994. The Separate Account is registered under the
Investment Company Act of 1940 (1940 Act) as a unit
investment trust. The Separate Account receives purchase
payments from individual flexible variable life contracts
issued by Security Equity Life Insurance Company (Security
Equity). Security Equity is a subsidiary of General
American Life insurance Company.
The Separate Account is divided into a number of Divisions. Each
Division invests in shares of an underlying portfolio
available to policyholders as directed by the policyholders.
The portfolios available for investment through the Separate
Account are the General American Capital Company Money
Market Fund, Wells Fargo Bank LAP Asset Allocation Fund,
Wells Fargo Bank LAP US Government Allocation Fund, Fidelity
VIP Growth Fund, Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Asset Manager Fund, Fidelity VIP II Index
500 Fund, Fidelity VIP Overseas Fund, Fidelity VIP High
Income Fund, Evergreen VA Fund, Evergreen VA Foundation
Fund, Evergreen VA Growth and Income Fund, Russell Multi-
Style Equity Fund, Russell Aggressive Equity Fund, Russell
Non-US Fund, and the Russell Core Bond Fund.
Investments in the Fidelity VIP II Investment Grade Bond Fund,
Fidelity VIP II Index 500 Fund, Evergreen VA Fund, Evergreen
VA Foundation Fund, and Evergreen VA Growth and Income Fund
Divisions were initiated in the Separate Account for
policyholders during 1996. Investments in the Fidelity VIP
Overseas Fund, Fidelity VIP High Income Fund, Wells Fargo
Bank LAP US Government Allocation Fund, Russell Multi-Style
Equity Fund, Russell Aggressive Equity Fund, Russell Non-US
Fund, and Russell Core Bond Fund Divisions were initiated in
the Separate Account for policyholders during 1997.
Investments in the Fidelity VIP II Asset Manager Fund
Division were initiated during 1998.
(2) Summary of Significant Accounting Policies
------------------------------------------
The following is a summary of significant accounting policies
followed by the Separate Account in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
(a) Investments
-----------
The Separate Account's investments are valued daily
based on the net asset value of the shares held.
The first-in, first-out method is used in
determining the cost of shares sold on
withdrawals by the Separate Account. Share
transactions are recorded on the trade date,
which is the same as the settlement date.
9 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(b) Federal Income Taxes
--------------------
Under current federal income tax law, investment
income or realized capital gains from sales of
investments of the Separate Account are not
taxable. Therefore, no federal income tax
expense has been provided.
(c) Dividend Reinvestment
---------------------
Dividends are recorded on the ex-dividend date and
immediately reinvested on the pay date.
(d) Use of Estimates
----------------
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of increase and decrease in net assets
from operations during the period. Actual
results could differ from those estimates.
(3) Policy Charges
--------------
Charges are deducted from premiums and paid to Security Equity for
providing the insurance benefits set forth in the contracts
and any additional benefits by rider, administering the
policies, reimbursement of expenses incurred in distributing
the policies, and assuming certain risks in connection with
the policies.
The premium payment, less the premium load charge, equals the net
premium. The premium load is deducted from the initial
premium and from each subsequent premium paid by a
policyholder, prior to allocation to the Separate Account.
The premium load includes a distribution charge, a premium
tax charge, and the DAC tax charge.
Distribution Charge: The distribution charge is composed of
-------------------
a premium expense load and a commission charge. The
amount of the distribution charge will depend on the
amount of initial premium and the sales commissions
paid.
Premium Expense Load - The premium expense load will be
--------------------
deducted from each premium and will equal a percentage
of the premium. The percentage will be determined
based on the sum of the initial premiums for all
policies in a case, in accordance with the following
table:
Sum of the initial premiums
of all contracts in the case Premium expense load
---------------------------- --------------------
Less than $250,000 2.00%
$250,000-$999,999 1.50
$1,000,000 and more 1.25
====
10 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
Commission Charge - A commission charge may be deducted from
-----------------
a premium. The commission charge deducted from a
premium will be equal to the full amount of
commissions payable by Security Equity on the target
premium.
Premium Tax Charge: Various states and subdivisions impose
------------------
a tax on premiums received by insurance companies.
Premium taxes vary from state to state. The
percentage deducted from each premium varies based on
the governing jurisdiction of the contract.
DAC Tax Charge: The DAC tax charge is equal to 1% of all
--------------
premiums paid in all contract years.
Charges are deducted monthly from the cash value of each policy to
compensate Security Equity for certain administrative costs,
the cost of insurance, and optional rider benefit charges.
Administrative Costs: Security Equity has responsibility
--------------------
for the administration of the policies and the
Separate Account. As reimbursement for administrative
expenses related to the maintenance of each policy and
the Separate Account, Security Equity assesses a
monthly administrative charge against each policy.
This monthly charge is $4.50 per policy. This cost
may change, but is guaranteed not to exceed $8.00 per
month per policy.
Cost of Insurance: The cost of insurance is deducted on
-----------------
each monthly anniversary for the following policy
month. Because the cost of insurance depends upon a
number of variables, the cost varies for each policy
month. The cost of insurance is determined by
multiplying the applicable cost of insurance rate by
the net amount at risk each policy month.
Optional Rider Benefit Charges: This monthly deduction
------------------------------
includes charges for any additional benefits provided
by rider.
Mortality and Expense Charges: In addition to the above policy
-----------------------------
charges, a daily charge against the operations of each
Division is made for the mortality and expense risks assumed
by Security Equity. The mortality and expense risk charge
assessed against each Division will never exceed an annual
effective rate of .50% of the policy's Separate Account
value attributable to that Division. Currently, the amount
of this charge is an annual effective rate of .35% of the
Separate Account value, which is equivalent to .000957233%
of the Separate Account value attributable to the Division
on a daily basis. The mortality risk assumed by Security
Equity under the contract is that insureds may, on average,
live for shorter periods of time than estimated. The
expense risk assumed by Security Equity under the contract
is the risk that the cost of issuing and administering the
contract may be more than estimated.
11 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(4) Purchases and Sales
-------------------
During the period ended December 31, 1998, purchases and proceeds
from the sales pertaining to the Separate Account were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
General American Capital Company Money Market Fund $23,032,326 3,898,147
Wells Fargo Bank LAP Asset Allocation Fund 11,114 637
Wells Fargo Bank LAP US Government Allocation Fund 17,465 1,135,456
Fidelity VIP Growth Fund 607,355 103,089
Fidelity VIP II Investment Grade Bond Fund 1,492,612 140,408
Fidelity VIP II Asset Manager Fund 467,531 10,922
Fidelity VIP II Index 500 Fund 3,030,384 308,101
Fidelity VIP Overseas Fund 853,600 18,220
Fidelity VIP High Income Fund 175,882 4,567
Evergreen VA Fund 837,980 91,677
Evergreen VA Foundation Fund 121,732 72,454
Evergreen VA Growth and Income Fund 122,304 74,834
Russell Multi-Style Equity Fund 3,577 1,604
Russell Aggressive Equity Fund 102,390 566
Russell Non-US Fund 88,302 787
Russell Core Bond Fund 2,174 500
</TABLE>
12 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
(5) Accumulation Unit Activity
--------------------------
For the year ended December 31, 1998, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital Company
Money Market Fund 1,933,223 18,494,161 (3,269,567) 17,157,817
Wells Fargo Bank LAP Asset Allocation Fund 13,509 3,638 0 17,147
Wells Fargo Bank LAP US Government
Allocation Fund 886,655 (21,581) (865,074) 0
Fidelity VIP Growth Fund 2,180,702 (35,749) 0 2,144,953
Fidelity VIP II Investment Grade Bond Fund 3,306,395 32,234 793,085 4,131,714
Fidelity VIP II Index 500 Fund 3,313,560 206,539 761,795 4,281,894
Fidelity VIP Overseas Fund 116,002 94,343 600,908 811,253
Fidelity VIP High Income Fund 147,714 125,991 1,285 274,990
Evergreen VA Fund 2,843,275 (48,125) 441,360 3,236,510
Evergreen VA Foundation Fund 2,334,346 (39,602) 0 2,294,744
Evergreen VA Growth and Income Fund 2,874,370 (37,835) 875 2,837,410
Russell Multi-Style Equity Fund 123,323 (1,193) 0 122,130
Russell Aggressive Equity Fund 41,107 (421) 96,132 136,818
Russell Non-US Fund 68,511 (684) 94,078 161,905
Russell Core Bond Fund 41,107 (397) 0 40,710
Fidelity VIP II Asset Manager Fund 0 (6,458) 278,281 271,823
</TABLE>
For the year ended December 31, 1997, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital Company
Money Market Fund 13,318,334 (4,108,503) (7,276,608) 1,933,223
Wells Fargo Bank LAP Asset Allocation Fund 8,931 4,798 (220) 13,509
Wells Fargo Bank LAP US Government
Allocation Fund - - 886,655 886,655
Fidelity VIP Growth Fund 2,212,740 (236,554) 204,516 2,180,702
Fidelity VIP II Investment Grade Bond Fund 3,124,238 81,752 100,405 3,306,395
Fidelity VIP II Index 500 Fund 1,561,960 (324,326) 2,075,926 3,313,560
Fidelity VIP Overseas Fund - (192,838) 308,840 116,002
Fidelity VIP High Income Fund - 1,205 146,509 147,714
Evergreen VA Fund 3,227,545 (407,318) 23,048 2,843,275
Evergreen VA Foundation Fund 1,585,211 (438,926) 1,188,061 2,334,346
Evergreen VA Growth and Income Fund 3,224,042 - (349,672) 2,874,370
Russell Multi-Style Equity Fund - - 123,323 123,323
Russell Aggressive Equity Fund - - 41,107 41,107
Russell Non-US Fund - - 68,511 68,511
Russell Core Bond Fund - - 41,107 41,107
</TABLE>
13 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Notes to Financial Statements
For the year ended December 31, 1996, transactions in accumulation
units were as follows:
<TABLE>
<CAPTION>
Units, Net Transfers Units,
beginning of deposits between end of
period (withdrawals) Divisions period
------ ------------- --------- ------
<S> <C> <C> <C> <C>
General American Capital
Company Money
Market Fund 8,266,085 13,774,894 (8,722,645) 13,318,334
Wells Fargo Bank LAP
Asset Allocation
Fund 3,253 5,521 157 8,931
Fidelity VIP Growth Fund 2,774 1,081,685 1,128,281 2,212,740
Fidelity VIP II Invest-
ment Grade Bond Fund - 1,607,694 1,516,544 3,124,238
Fidelity VIP II Index 500 Fund - 653,667 908,293 1,561,960
Evergreen VA Fund - 1,569,119 1,658,426 3,227,545
Evergreen VA Foundation Fund - 755,933 829,278 1,585,211
Evergreen VA Growth and
Income Fund - 1,565,607 1,658,435 3,224,042
</TABLE>
14 (Continued)
<PAGE>
<PAGE>
Schedule 1
----------
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THIRTEEN
Schedule of Investments
December 31, 1998
<CAPTION>
Number of Market
shares value
------ -----
<S> <C> <C>
General American Capital Company Money Market Fund 1,111,754 $21,402,310
Wells Fargo Bank LAP Asset Allocation Fund 2,680 36,048
Wells Fargo Bank LAP US Government Allocation Fund 6 63
Fidelity VIP Growth Fund 132,159 5,929,959
Fidelity VIP II Investment Grade Fund 446,894 5,791,750
Fidelity VIP II Asset Manager Fund 27,060 491,407
Fidelity VIP II Index 500 Fund 86,676 12,242,963
Fidelity VIP Overseas Fund 50,337 1,009,262
Fidelity VIP High Income Fund 26,478 305,292
Evergreen VA Fund 339,678 5,200,464
Evergreen VA Foundation Fund 254,649 3,687,313
Evergreen VA Growth and Income Fund 286,319 4,460,853
Russell Multi-Style Fund 10,113 162,016
Russell Aggressive Equity Fund 12,015 152,589
Russell Non-US Fund 14,629 162,240
Russell Core Bond Fund 4,253 45,422
</TABLE>
15 (Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Equity Life Insurance Company:
We have audited the accompanying balance sheets of Security Equity Life
Insurance Company as of December 31, 1998 and 1997, and the related
statements of operations and comprehensive income, stockholder's equity,
and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Security
Equity Life Insurance Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
As discussed in Note 1(h) to the financial statements, the Company changed
its accounting policy for the capitalization of acquisition costs in
1998.
April 30, 1999
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1998 and 1997
<CAPTION>
Assets 1998 1997
<S> <C> <C>
Bonds, at fair value $ 59,841,336 58,580,394
Policy loans 4,831,088 4,738,178
Cash and cash equivalents 1,403,321 4,519,584
------------ -----------
Total cash and invested assets 66,075,745 67,838,156
Reinsurance benefits recoverable:
Future policy benefits 4,970,259 5,575,381
Policy and contract claims 1,784,950 1,572,069
Accrued investment income 1,281,720 1,264,239
Goodwill 1,190,301 1,269,661
Deferred policy acquisition costs 17,698,757 14,112,608
Value of business acquired 2,375,000 2,467,000
Deferred tax asset 5,830,710 5,671,074
Other assets 1,247,845 665,967
Separate account assets 403,857,411 290,409,444
------------ -----------
Total assets $506,312,698 390,845,599
============ ===========
Liabilities and Stockholder's Equity
Reserve for future policy benefits 3,161,224 3,426,250
Policyholder account balances 47,409,775 47,594,304
Policy and contract claims 1,140,695 320,358
Other policyholders' funds 18,215 13,733
Unearned revenue 17,139,317 16,079,166
Other liabilities and accrued expenses 2,924,436 4,643,201
Payable to affiliates 136,209 41,307
Separate account liabilities 403,857,411 290,409,444
------------ -----------
Total liabilities 475,787,282 362,527,763
Commitments and contingencies (note 10)
Stockholder's equity:
Common stock, par value $25; 100,000 shares
authorized, issued, and outstanding 2,500,000 2,500,000
Additional paid-in capital 27,447,892 27,447,892
Accumulated other comprehensive income 2,553,998 1,870,338
Accumulated deficit (1,976,474) (3,500,394)
------------ -----------
Total stockholder's equity 30,525,416 28,317,836
------------ -----------
Total liabilities and stockholder's equity $506,312,698 390,845,599
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Operations and Comprehensive Income
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Premiums $ 3,663,368 4,246,718 6,371,662
Net investment income 4,296,760 4,774,386 4,546,544
Universal Life Policy Charges 8,736,733 9,307,665 3,811,896
Other Income 105,456 49,671 19,069
Realized investment gains 13,154 93,385 313,185
----------- ---------- ----------
Total revenues 16,815,471 18,471,825 15,062,356
Benefits and expenses:
Policy benefits 2,946,281 1,326,460 3,309,410
Policy surrenders, net 1,760,448 4,335,709 1,635,498
Change in unearned revenue 1,060,151 9,342,363 1,912,470
Change in reserve for future policy benefits (1,729,615) (5,075,024) (2,757,042)
Interest credited 2,341,796 2,392,355 2,437,432
Commissions 2,097,482 479,380 3,590,084
Change in deferred acquisition costs (2,870,169) (5,578,850) (3,235,101)
General and administrative expenses 4,950,753 5,412,113 4,795,193
Amortization of goodwill 79,360 79,356 79,356
Amortization (accretion) of value of business
acquired, net 91,996 (6,000) (20,000)
Other expenses 4,300,430 4,256,509 3,598,597
----------- ---------- ----------
Total benefits and expenses 15,028,913 16,964,371 15,345,897
Income (loss) from operations before
federal income tax expense (benefit) 1,786,558 1,507,454 (283,541)
Federal income tax expense (benefit):
Current 1,506,379 3,790,833 15,000
Deferred (778,354) (3,243,000) (92,000)
----------- ---------- ----------
Total Federal income tax expense (benefit) 728,025 547,833 (77,000)
----------- ---------- ----------
Income (loss) before cumulative effect of a change
in accounting principle 1,058,533 959,621 (206,541)
Cumulative effect on prior years (to December 31,
1997) of changing to a different capitalization
policy for policy acquistion costs, net of
taxes of $250,593 465,387 - -
----------- ---------- ----------
Net income (loss) 1,523,920 959,621 (206,541)
----------- ---------- ----------
Other comprehensive income (loss) 683,660 1,811,226 (1,931,020)
----------- ---------- ----------
Comprehensive income $ 2,207,580 2,770,847 (2,137,561)
=========== ========== ==========
Pro forma net income assuming the new policy
acquisition costs capitalization method is
applied retroactively $ 1,058,533 1,009,662 61,787
=========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
Accumulated
Additional Other Total
Common paid-in comprehensive Accumulated stockholder's
stock capital income (loss) deficit equity
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 2,500,000 27,447,892 1,990,132 (4,253,474) 27,684,550
Net loss - - - (206,541) (206,541)
Other comprehensive loss - - (1,931,020) - (1,931,020)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 2,500,000 27,447,892 59,112 (4,460,015) 25,546,989
Net income - - - 959,621 959,621
Other comprehensive income - - 1,811,226 - 1,811,226
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1997 $2,500,000 27,447,892 1,870,338 (3,500,394) 28,317,836
Net income - - - 1,523,920 1,523,920
Other comprehensive income - - 683,660 - 683,660
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 $2,500,000 27,447,892 2,553,998 (1,976,474) 30,525,416
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,523,920 959,621 (206,541)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Change in:
Reinsurance benefits ceded 329,241 1,337,497 441,300
Accrued investment income (17,481) (33,756) 48,733
Other assets (581,879) 211,321 372,746
Deferred policy acquisition costs, net (2,870,169) (5,578,850) (3,235,101)
Policy liabilities (449,553) (3,496,036) (1,004,266)
Policy and contract claims 820,337 (1,173,980) (682,499)
Other policyholders' funds 4,482 (7,990) (3,341)
Federal income tax payable (550,832) 709,833 15,000
Change in unearned revenue reserve 1,060,151 9,342,363 1,912,470
Other liabilities and accrued expenses (1,171,844) (2,669,279) 4,317,546
Payable to affiliates 94,902 (34,203) 23,725
Accretion of bond premiums, net 157,165 130,011 189,350
Deferred tax expense (benefit) (527,761) (3,243,000) (92,000)
Net (gain) loss on sale of investments (13,154) (93,385) (313,185)
Amortization of goodwill 79,360 79,356 79,356
Amortization (accretion) of value of
business acquired 91,996 (6,000) (20,000)
----------- ------------ -----------
Net cash provided by (used in)
operating activities (2,021,119) (3,566,477) 1,843,293
----------- ------------ -----------
Cash flows from investing activities:
Purchase of investments (4,950,790) (6,925,121) (12,790,361)
Sale or maturity of investments 4,597,722 9,153,009 15,141,063
Increase in policy loans, net (92,910) 343,771 (557,046)
----------- ------------ -----------
Net cash provided by (used in)
investing activities (445,978) 2,571,659 1,793,656
----------- ------------ -----------
Cash flows from financing activities:
Policyholder account balances:
Deposits on interest-sensitive life
contracts 73,457,292 147,698,966 48,448,968
Transfers to separate account for
interest-sensitive life contracts, net (73,453,479) (147,718,944) (48,468,986)
----------- ------------ -----------
Net cash provided by (used in)
financing activities 3,813 (19,978) (20,018)
----------- ------------ -----------
Net increase (decrease) in cash and
cash equivalents (3,116,263) (1,014,796) 3,557,298
Cash and cash equivalents at beginning of year 4,519,584 5,534,380 1,977,082
----------- ------------ -----------
Cash and cash equivalents at end of year $ 1,403,321 4,519,584 5,534,380
=========== ============ ===========
Supplemental disclosure of cash flow
information -- taxes paid $ 2,057,000 3,081,000 -
=========== ============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1998 and 1997
=============================================================================
(1) General Information and Summary of Significant Accounting Policies
Security Equity Life Insurance Company (SELIC or the Company) is a
wholly owned subsidiary of General American Life Insurance Company
(General American or the Parent). On December 31, 1993, Security
Mutual Life Insurance Company of New York (Security Mutual) sold
100% of the Company's stock to General American, as approved by
the State of New York Department of Insurance.
In 1986, the Company commenced direct writing of universal life
and term business, and in 1987 began marketing a single premium
whole life policy. In 1984, the Company began assuming single
premium deferred annuity (SPDA) and other insurance business
through reinsurance agreements with Security Mutual. The SPDA and
ordinary life insurance blocks of business were recaptured by
Security Mutual in 1992.
SELIC is licensed in 40 states and the District of Columbia.
Insurance operations have generally been limited to the sale of
individual life insurance products (term and universal life) made
through the general agency system, including career agents and
brokers.
With the sale of SELIC by Security Mutual to General American,
SELIC's activities have been redirected to serving the insurance
needs of publicly held corporations and New York state residents.
Additionally, SELIC focuses on accessing numerous and alternative
distribution channels in addition to a general agency system.
SELIC markets Corporate Owned Life Insurance (COLI) primarily
through specially designed variable products.
The acquisition of Security Equity by General American was
accounted for as a purchase transaction and, accordingly, the
purchase price was allocated to the assets and liabilities
acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. These allocations have
been reflected, or "pushed down," in the financial statements of
the Company. The total purchase price of $19,947,892 was
allocated among the fair value of tangible net assets of
$15,997,813, value of business acquired of $2,363,000, and
goodwill of $1,587,079 at the date of acquisition.
The accompanying financial statements are prepared on the basis of
generally accepted accounting principles. The preparation of
financial statements requires the use of estimates by management
which affect the amounts reflected in the financial statements.
Actual results could differ from those estimates.
The significant accounting policies of the Company are as follows:
(a) Recognition of Policy Revenue and Related Expenses
Policy revenue recognition varies depending upon the type of
insurance product. For traditional life products with fixed and
guaranteed premiums and benefits, such as whole life and term
insurance policies, premiums are recognized when due. Benefits
and other expenses
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
of these products are associated with earned premiums and other
sources of earnings so as to result in recognition of profits over
the life of the contracts. This association is accomplished by
means of the provision for liabilities for future benefits and the
deferral and amortization of policy acquisition costs. Premiums
collected on universal life-type policies are reported as deposits
to the policyholder account balance and not as income to SELIC.
Income to SELIC on these policies consists of the assessments for
mortality costs, surrenders, and expenses.
(b) Investment Securities
At December 31, 1998 and 1997, all long-term securities are
carried at fair value with the unrealized gain (loss), net of tax
impact, being reflected as a separate component of stockholder's
equity as the Company considers all long-term securities as
available-for-sale. Short-term investments are carried at cost
which approximates fair value. Policy loans are valued at
aggregate unpaid balances. The fair value of policy loans is
assumed to equal the carrying value because the loans have no
fixed maturity date and, therefore, it is not practicable to
determine a fair value.
Realized gains or losses on the sale of securities are determined
on the basis of specific identification and include the impact of
any related amortization of premium or accretion of discount which
is generally computed consistent with the interest method.
(c) Value of Business Acquired
Value of business acquired (VOBA) represents the present value of
future profits resulting from the acquisition of insurance
policies in a purchase transaction. VOBA is amortized in
proportion to the estimated premiums or gross profits, depending
on the type of contract, with accretion of interest on the
unamortized discounted balance. In 1998, 1997 and 1996,
amortization of VOBA was $222,000, $134,000 and $121,000, and the
accretion of interest on the unamortized balance was $130,000,
$140,000 and $141,000, respectively. The carrying value of VOBA
is periodically evaluated to ascertain recoverability from future
operations. Impairment would be recognized in current operations
when determined.
(d) Goodwill
Goodwill, representing the excess of purchase price over the fair
value of assets acquired, is amortized on a straight-line basis
over 20 years. The carrying value of goodwill is periodically
evaluated to ascertain recoverability from future operations.
Impairment would be recognized in current operations when
determined.
(e) Reserve for Future Policy Benefits
Liabilities for future benefits on life policies are established
in amounts adequate to meet the estimated future obligations on
policies in force. Liabilities for future policy benefits on
certain life insurance policies are computed using the net level
premium method and are based upon assumptions as to future
investment yield, mortality, and withdrawals.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
Mortality and withdrawal assumptions for all policies have been
based on various actuarial tables which are consistent with the
Company's own experience. Liabilities for future benefits on
certain long-duration life insurance contracts are carried at
accumulated policyholder values.
(f) Federal Income Taxes
The Company is taxed as a life insurance company under the Deficit
Reduction Act of 1984. The Company establishes deferred taxes
under the asset and liability method of SFAS No. 109, Accounting
for Income Taxes, and deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
The Company files its federal income tax return as a separate
entity.
(g) Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on a
basis consistent with terms of the risk transfer reinsurance
contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to
reinsurance ceded for future policy benefits and claim liabilities
have been reported as assets for these items, and commissions and
expense allowances received in connection with reinsurance ceded
have been accounted for in income as earned over the anticipated
reinsurance contract life. Reinsurance does not relieve the
Company from its primary responsibility to meet claim obligations.
(h) Deferred Policy Acquisition Costs and Unearned Revenues
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, have been
deferred to the extent that such costs are deemed recoverable.
Such costs may include commissions, as well as certain costs of
policy issuance and underwriting. Also, certain charges which are
assessed to contract holders at the inception of the contract are
deferred as unearned revenues. These deferred costs and revenues
are amortized based on and in relation to the estimated gross
profit streams of the underlying business. In 1998, 1997 and
1996, the Company deferred $5,100,000, $5,900,000 and $2,400,000,
respectively, in acquisition costs and recognized amortization of
$2,100,000, $336,000 and ($798,000), respectively. During 1998, 1997,
and 1996, the Company deferred certain contract charge revenues of
$4,400,000, $8,000,000, and $2,300,000, respectively and recognized
amortization of $1,600,000, $1,000,000, and ($480,000), respectively.
During 1997 a policyholder utilized their "free-look" provision of
their variable life contract written in 1996 which resulted in the
return of approximately $13 million in contract deposits to the
policyholder. Accordingly, the Company wrote off $1.5 million of
related deferred acquisition costs associated with the contract
which were capitalized in 1996.
Prior to 1998, commission expenses and premium taxes were the only
acquisition costs deferred by the Company. During 1998, the
Company changed its accounting policy to defer other acquisition
costs, such as marketing and underwriting, in its calculation of
deferred acquisition costs. This change was adopted to provide
for an accounting
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
policy which is consistent with that of its parent and has been
applied retroactively. The effect of the change in 1998 was to
increase income by $715,980. The adjustment of $415,387, after
reduction for income taxes of $250,593 to apply the new policy
retroactively is included in income in 1998. The pro forma amounts,
net of tax, shown on the income statement have been adjusted for the
effect of retroactive application of the change in policy.
(i) Separate Account Business
The assets and liabilities of the separate account represent
segregated funds administered and invested by the Company for
purposes of funding variable life insurance contracts for the
exclusive benefit of variable life insurance contract holders.
The Company receives administrative fees from the separate account
and retains varying amounts of withdrawal charges to cover
expenses in the event of early withdrawals by contract holders.
The assets and liabilities of the separate account are carried at
market value.
(j) Fair Value Disclosures
Fair value disclosures are required under SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. Such fair
value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument.
Although fair value estimates are calculated using assumptions
that management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates should
be used with care. The following assumptions were used to
estimate the fair market value of each class of financial
instrument for which it was practicable to estimate fair value:
Invested assets - Fixed maturities (Bonds) are valued using quoted
---------------
market prices, if available. If quoted market prices are not
available, fair value is estimated using quoted market prices of
similar securities. The carrying value of policy loans
approximates fair value.
Policyholder account balances - The fair value of policyholder
-----------------------------
account balances is equal to the discounted estimated future cash
flows using discounted cash flow calculations, based on interest
rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts being
valued. The carrying value approximates fair value at December
31, 1998 and 1997.
Cash and short-term investments - The carrying amount is a
-------------------------------
reasonable estimate of fair value.
(k) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial paper,
and repurchase agreements with original or remaining maturities of
90 days or less when purchased.
(l) Reclassification
Certain amounts in the 1996 and 1997 financial statements have
been reclassified to conform to the 1998 presentation.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(2) Investments
The sources of net investment income (principally interest)
follow:
<TABLE>
<CAPTION>
===================================================================================
1998 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $3,996,895 4,161,182 4,291,428
Short-term investments 157,456 278,606 75,110
Policy loans and other 287,761 409,406 260,276
-----------------------------------------------------------------------------------
4,442,112 4,849,194 4,626,814
Investment expenses 145,352 74,808 80,270
-----------------------------------------------------------------------------------
Net investment income $4,296,760 4,774,386 4,546,544
===================================================================================
</TABLE>
The amortized cost and estimated fair value of bonds at December
31, 1998 and 1997 are shown below. Fair value is based upon
market prices obtained from independent pricing services.
<TABLE>
<CAPTION>
============================================================================================
1998
--------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $18,244,322 2,368,205 164,359 20,448,168
Corporate securities 35,997,741 2,173,872 529,901 37,641,712
Mortgage-backed securities 1,670,046 81,410 0 1,751,456
--------------------------------------------------------------------------------------------
$55,912,109 4,623,487 694,260 59,841,336
============================================================================================
</TABLE>
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
<TABLE>
<CAPTION>
==============================================================================================
1997
----------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government obligations (including
obligations guaranteed by the
U.S. government) $ 6,387,244 369,801 148 6,756,897
Corporate securities 36,700,238 2,523,621 153,514 39,070,345
Mortgage-backed securities 12,615,469 323,476 185,793 12,753,152
----------------------------------------------------------------------------------------------
$55,702,951 3,216,898 339,455 58,580,394
==============================================================================================
</TABLE>
The amortized cost and estimated fair value of bonds at December
31, 1998 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
===================================================================================
Estimated
Amortized market
cost value
-----------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,297,987 1,302,600
Due after one year through five years 4,784,883 4,871,814
Due after five years through ten years 7,371,362 7,713,857
Due after ten years 40,787,831 44,201,609
Mortgage-backed securities 1,670,046 1,751,456
-----------------------------------------------------------------------------------
$55,912,109 59,841,336
===================================================================================
</TABLE>
Proceeds from the sale, call, and maturity of investments in
bonds during 1998, 1997, and 1996 were $4,597,724, $9,153,009,
and $15,141,063, respectively. Gross gains of $84,860, $346,842,
and $381,856 and gross losses of $0, $253,457, and $68,671 were
realized on those sales in 1998, 1997, and 1996, respectively.
The Company has bonds on deposit with various state insurance
departments with an amortized cost of approximately $2,388,000
and $2,387,000 at December 31, 1998 and 1997, respectively.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(3) Reinsurance
The Company reinsures certain risks with other insurance
companies as the Company sets a maximum retention amount
(currently $125,000) to help reduce the loss on any single
policy.
Premiums and related reinsurance amounts for the years ended
December 31, 1998, 1997, and 1996 as they relate to transactions
with affiliates are summarized as follows:
<TABLE>
<CAPTION>
============================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Reinsurance premiums ceded $1,154,059 1,489,006 1,632,262
Policy benefits ceded 574,307 (23,067) 1,397,188
============================================================================================
</TABLE>
Premiums and related reinsurance amounts for the years ended
December 31, 1998, 1997, and 1996 as they relate to transactions
with non-affiliates are summarized as follows:
<TABLE>
<CAPTION>
============================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reinsurance transactions with non-affiliates:
Reinsurance premiums ceded $5,585,519 5,352,578 5,744,060
Policy benefits ceded 3,132,174 463,458 3,824,327
============================================================================================
</TABLE>
The Company remains contingently liable with respect to any
reinsurance ceded and would become actually liable if the
assuming company was unable to meet its obligations under the
reinsurance treaty.
(4) Federal Income Taxes
A reconciliation of the Company's "expected" federal income tax
expense (benefit), computed by applying the federal U.S.
corporate tax rate of 35% to income (loss) from operations before
federal income tax expense (benefit), is as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
==================================================================================================
1998 1997 1996
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $625 528 (99)
Amortization of intangibles, net 60 26 21
Other, net 43 (6) 1
--------------------------------------------------------------------------------------------------
Federal income tax expense (benefit) $728 548 (77)
==================================================================================================
<CAPTION>
==================================================================================================
Total income taxes were allocated as follows: 1998 1997 1996
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for income taxes from continuing operations $ 728 548 (77)
Tax effect of cumulative effect of change in accounting 251 0 0
Income tax from shareholder's equity:
Unrealized holding gain on debt and equity securities
Recognized for financial reporting purposes 368 1,839 (1,059)
--------------------------------------------------------------------------------------------------
Total income tax $1,347 2,387 (1,136)
==================================================================================================
</TABLE>
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
December 31, 1998 and 1997 are presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
=================================================================================
1998 1997
---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy acquisition costs $ 1,003 4,897
Reserves 3,024 3,380
Capital loss carry-forward 0 101
Unearned Revenue 5,999 1,307
---------------------------------------------------------------------------------
Total gross deferred tax assets 10,026 9,685
Less valuation allowance - -
---------------------------------------------------------------------------------
Net deferred tax assets 10,026 9,685
---------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 1,374 1,023
Other, net 2,821 2,991
---------------------------------------------------------------------------------
Total gross deferred tax liabilities 4,195 4,014
---------------------------------------------------------------------------------
Net deferred tax asset $ 5,831 5,671
=================================================================================
</TABLE>
On December 31, 1993, General American purchased 100% of the
Company. Pursuant to the acquisition, the election was made under
Internal Revenue Code Section 338(h)(10) to treat the purchase of
stock as a purchase of assets for tax purposes. As a result, a
revaluation of the tax bases of the Company's assets and
liabilities was made in connection with the acquisition.
The Company believes that a valuation allowance with respect to
the realization of the total gross deferred tax asset is not
necessary. In assessing the realization of deferred tax assets,
the Company considers whether it is more likely than not that the
deferred tax assets will be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary
differences become deductible. Although the Company has a limited
history of earnings, its Parent does have a long history of
earnings. Pursuant to Internal Revenue Service regulations, the
Company cannot file a consolidated tax return with its Parent
until five years following the acquisition. However, after five
years, the Company will be able to file a consolidated tax return
with its Parent, and realization of the gross tax asset will not
be dependent solely on the Company's ability to generate its own
taxable income. General American has a proven history of earnings
and it appears more likely than not that the Company's gross
deferred tax asset will ultimately be fully realized.
The Company filed its federal income tax return on a consolidated
basis with Security Mutual prior to 1994. In connection with the
Company's transfer of stock ownership, Security Mutual agreed to
assume all unpaid tax liability incurred prior to the date of
sale.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
(5) Related-Party Transactions
The Company purchases certain administrative services from General
American. Charges for services performed are based upon personnel
and other costs involved in providing such services. The expenses
incurred for these services were $508,000, $578,000, and $529,000
for 1998, 1997, and 1996, respectively.
Effective January 1, 1994, the Company entered into an
administrative service agreement with Security Mutual. Under the
agreement, Security Mutual provides for the administration of
policies issued through December 31, 1993. The expenses incurred
for these services were $1,420,538, $1,467,364, and $1,621,268 for
1998, 1997, and 1996, respectively.
On November 18, 1997, General American elected to surrender their
existing VUL policy which was purchased from the Company in
November 1996. General American incorporated the cash value from
their surrendered policy of $2,965,211 with an additional
contribution of $37,400,000 to purchase another VUL policy with
the Company totaling $40,365,211.
(6) Pension, Incentive, and Health and Life Insurance Benefit Plans
Associates of SELIC participate in a noncontributory multi-
employer defined benefit pension plan jointly sponsored by SELIC
and General American. The benefit is accrued are based on the
number of years of service and compensation level of each
participant. No pension expense was recognized in 1998, 1997, and
1996 due to overfunding of the plan.
In addition, in 1995 SELIC adopted an associate bonus plan
applicable to full-time exempt associates. Bonuses are based on
an economic value-added model prepared annually by the Company.
Total bonuses accrued to Company employees were $54,000 and
$302,000 in 1998 and 1997, respectively.
In order to attract and retain highly qualified Non-Employee
Directors, the Company enacted an arrangement under which Non-
Employee Directors may elect to reduce their current Director's
Compensation in exchange for future benefits. This plan, known as
the Security Equity Deferred Compensation Plan for Non-Employee
Directors, was adopted and effective as of April 15, 1995. The
deferred liabilities were $331,000, $222,000, and $117,000 in
1998, 1997, and 1996, respectively.
SELIC provides for certain health care and life insurance benefits
for retired employees in accordance with Statement of Financial
Accounting Standards No. 106, Employer's Accounting for
Postretirement Benefits Other Than Pensions (SFAS No. 106). SFAS
No. 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services. The amounts involved are not material.
(7) STATUTORY FINANCIAL INFORMATION
The Company is subject to financial statement filing requirements
of the State of New York Department of Insurance, its state of
domicile, as well as the states in which it transacts business.
Such financial statements, generally referred to as statutory
financial statements, are prepared on a basis of accounting which
varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include: (1)
charging of policy acquisition costs to income as incurred; (2)
establishment of a liability for future policy benefits computed
using required valuation standards which may vary in methodology
utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting
and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield
stabilization on fixed maturity dispositions prior to maturity
with asset valuation reserves based on statutorily determined
formulae and interest stabilization reserves designed to level
yields over their original purchase maturities; (5) deferred
premiums provided for statutory mean reserves; (6) annuity
contract deposits represent funds deposited by policyholders and
are included in premiums or contract charges; (7) non-recognition
of certain assets as nonadmitted through a direct charge to
surplus; and (8) valuation of investments in bonds at amortized
cost.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The stockholder's equity (surplus) and net gain/(loss) of the
Company at December 31, 1998, 1997, and 1996, as determined using
statutory accounting practices, is summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================
1998 1997 1996
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Surplus as reported to
regulatory authorities $11,691,630 13,420,004 12,441,081
Net gain/(loss) reported
to regulatory authorities (1,745,154) 1,090,066 (2,778,942)
=========================================================================================
</TABLE>
(8) DIVIDEND RESTRICTIONS
Dividend payments by the Company are restricted by state insurance
laws as to the amount that may be paid as well as requiring the
prior notice and approval of the State of New York Department of
Insurance. The Company did not pay a dividend in 1998, 1997, or
1996.
(9) RISK-BASED CAPITAL
The insurance departments of various states, including the
Company's domiciliary state of New York, impose risk-based capital
(RBC) requirements on insurance enterprises. The RBC calculation
serves as a benchmark for the regulation of life insurance
companies by state insurance regulators. The requirements apply
various weighted factors to financial balances or activity levels
based on their perceived degree of risk.
(Continued)
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
The RBC guidelines define specific capital levels where action by
the Company or regulatory authorities is required based on the
ratio of a company's actual total adjusted capital (sum of capital
and surplus and asset valuation reserve) to control levels
determined by the RBC formula. At December 31, 1998, the
Company's actual total adjusted capital was well in excess of
minimum levels which would require action by the Company or
regulatory authorities under the RBC formula.
(10) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under a non-
cancelable lease which expires in August 2003. The future minimum
lease obligations under the terms of the lease are summarized as
follows:
====================================================================
Year ended December 31, 1999 $130,690
Year ended December 31, 2000 $136,291
Year ended December 31, 2001 $141,892
Year ended December 31, 2002 $147,497
Year ended December 31, 2003 $153,094
--------------------------------------------------------------------
Rent expense totaled approximately $110,780, $86,700, and $82,700
in 1998, 1997, and 1996, respectively.
(11) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS), No. 130,
"Reporting Comprehensive Income," effective for years beginning
after December 15, 1997. SFAS No. 130 establishes standards for
reporting and display or comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-
purpose financial statements. The most significant items of
comprehensive income are net income and changes in unrealized
gains and losses on securities. The adoption of SFAS No. 130 does
not affect results of operations or financial position, but
affects their presentation and disclosure. The Company has
adopted SFAS No. 130 as of January 1, 1998, and the following
summaries present the components of the Company's comprehensive
income, other than net income, for the periods ending December 31,
1998, 1997, and 1996:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
1998
===========================================================================================
Before tax (Expense) Net of tax
amount benefit amount
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains arising
during the period $1,064,939 (372,729) 692,210
Less: reclassification adjustment
for gains realized in net income (13,154) 4,604 (8,550)
-------------------------------------------------------------------------------------------
Other comprehensive income 1,051,785 (368,125) 683,660
===========================================================================================
</TABLE>
12
<PAGE>
<PAGE>
SECURITY EQUITY LIFE INSURANCE COMPANY
Notes to Financial Statements
=============================================================================
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1997
===================================================================================================
Before tax (Expense) Net of tax
amount benefit amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains arising
during the period $2,879,887 (1,007,961) 1,871,926
Less: reclassification adjustment
for gains realized in net income (93,385) 32,685 (60,700)
---------------------------------------------------------------------------------------------------
Other comprehensive income 2,786,502 (975,276) 1,811,226
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1996
===================================================================================================
Before tax (Expense) Net of tax
amount benefit amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding losses arising
during the period $(2,657,615) 930,165 (1,727,450)
Less: reclassification adjustment
for gains realized in net income (313,185) 109,615 (203,570)
---------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (2,970,800) 1,039,780 (1,931,020)
===================================================================================================
</TABLE>
13
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby
undertakes to file with the Securities an Exchange Commission such
supplementary and periodic information, documents, and reports as may be
prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to the Depositor's Articles of Incorporation,
and to Article VII of the Depositor's By-Laws, each filed as an exhibit
to this Registration Statement. Specifically, Section VII.1. of Article
VII of the Depositor's By-Laws provides that the Depositor may indemnify
a director or officer ("Indemnified Person") for amounts paid in
settlement and reasonable expenses in connection with an action (i)
brought by or in the right of the Depositor, if the Indemnified Person
acted in good faith for a purpose reasonably believed by the Indemnified
Person to be in (or, under certain circumstances, not opposed to) the
best interests of the Depositor; or (ii) other than an action brought by
or in the right of the Depositor, if the Indemnified Person acted in
good faith for a purpose reasonably believed by the Indemnified Person
to be in (or, under certain circumstances, not opposed to) the best
interests of Depositor, and in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his or her conduct was
unlawful. Section VII.1. further provides that such indemnification
must be authorized by the Board of Directors of the Depositor acting by
a quorum consisting of directors who are not parties to the action or
proceeding, or if such quorum is unobtainable or if a quorum of
disinterested directors so directs, by the Board of Directors upon an
opinion of independent legal counsel, or by the Depositor's
shareholders, in each case provided that certain findings are made.
Section VII.1. further provides that the Depositor will indemnify a
director or officer in connection with actions described under (i) and
(ii) above if the Indemnified Person has been successful in the defense
of a civil or criminal or proceeding as described in (i) and (ii) above.
Section VII.1. further provides that a notification of payment of
indemnification, advancement or allowance under Sections 721 to 726,
inclusive, of the Business Corporation Law of New York shall be made
unless a notice has been filed with Superintendent of Insurance of the
State of New York as specified in Section VII.1. This description is
qualified in its entirety by the provisions of the By-Laws filed as an
exhibit to this Registration Statement.
II-1
<PAGE>
<PAGE>
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person
of the Registration in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
REASONABLENESS OF FEES AND CHARGES
Security Equity Life Insurance Company, of which Registrant forms a
part, hereby represents that the fees and charges deducted under the
terms of the Contracts are, in the aggregate, reasonable in relationship
to the services rendered, the expenses expected, and the risks assumed
by Security Equity Life Insurance Company.
II-2
<PAGE>
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and
documents:
* The facing sheet.
* A reconciliation and tie of the information shown in the information
shown in the prospectuses with the items of Form N-8B-2.
* Prospectus Version A consisting of 89 pages and Prospectus
Version B consisting of 86 pages.
* The Undertaking to File Reports.
* The Rule 484 Undertaking.
* Reasonableness of Fees and Charges.
* The signatures.
* The following exhibits:
1. The following exhibits correspond to the numbers under
paragraph A of the instructions for exhibits to Form N-8B-2:
(1) Resolutions Establishing Security Equity Life
Insurance Company Separate Account 13.<F1>
(2) None.
(3)(a) Principal Underwriting Agreement between SELIC
and Walnut Street Securities, Inc.<F1>
(3)(b) Form of Selling Agreement between Walnut Street
Securities, Inc. and Selling Firms.<F1>
(3)(c) Schedule of Sales Commissions.<F2>
(4) None.
(5)(a) Specimen of Contract.<F1>
(5)(b) Riders and Endorsements.<F1>
(6) Certificate of Incorporation and By-Laws of
SELIC.<F1>
(7) None.
(8) None.
(9)(a) Form of Participation Agreement.<F2>
(9)(b) Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation
and Security Equity Life Insurance Company.<F2>
(9)(c) Participation Agreement Among Variable Insurance
Products Fund II, Fidelity Distributors
Corporation and Security Equity Life Insurance
Company.<F2>
(9)(d) Form of Amendment No. 1 to Participation
Agreement Among Variable Insurance Products
Fund, Fidelity Distributors Corporation and
Security Equity Life Insurance Company.<F3>
II-3
<PAGE>
<PAGE>
(9)(e) Form of Amendment No. 1 to Participation
Agreement Among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and
Security Equity Life Insurance Company.<F3>
(9)(f) Form of Participation Agreement between
Evergreen Variable Trust and Security Equity
Life Insurance Company.<F3>
(9)(g) Fund Participation Agreement Among Tomorrow Funds
Retirement Trust, Weiss, Peck & Greer,
L.L.C., and Security Equity Life Insurance Company.
(9)(h) Form of Participation Agreement Among Security
Equity Life Insurance Company, Russell Insurance
Funds, and Russell Fund Distributors, Inc.
(9)(i) Form of Participation Agreement Among Life &
Annuity Trust, Stephens, Inc., Wells Fargo Bank,
and Security Equity Life Insurance Company.
(10) Specimen of Application for Policy.<F1>
2. See Exhibit 3.(i).
3.(i) Opinion of Juanita M. Thomas, Esq. as to the legality of
Securities Being Issued and Consent.<F2>
3.(ii) Opinion of Victor Bertolozzi, FSA, MAAA and Consent.<F2>
3.(iii) Opinion of Ralph A. Gorter, FSA, and Consent.<F4>
4. None.
5. Inapplicable.
6. Inapplicable.
7. Powers of Attorney.<F1>
8. Form of Notice of Withdrawal Right.<F2>
9. Consent of KPMG LLP.
NOTES
1. Incorporated by reference to Registrant's registration statement
on Form S-6 (File No. 88524), filed January 13, 1995.
2. Incorporated by reference to Registrant's Pre-Effective Amendment
No. 1 to registration statement on Form S-6 (File No. 33-88524),
filed August 30, 1995.
3. Incorporated by reference to Registrant's Post-Effective Amendment
No. 1 to registration statement on Form S-6 (file Nos. 33-88524
and 811-8938), filed April 29, 1996.
4. Incorporated by reference to Registrant's Pre-Effective Amendment
No. 2 to registration statement on Form S-6 (File Nos. 33-8852 and
811-8938), filed April 28, 1997.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Security
Equity Life Insurance Company and Security Equity Life Insurance Company
Separate Account 13 certify that they meet all of the requirements for
effectiveness of this Post-Effective Amendment No. 5 under Rule 485(b)
and have duly caused this amended Registration Statement to be signed
on their behalf by the undersigned thereunto duly authorized, and the
seal of Security Equity Life Insurance Company to be hereunto affixed
and attested, all in the City of Armonk and State of New York, on the
30th day of April, 1999.
SECURITY EQUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 13 (Registrant)
By: SECURITY EQUITY LIFE INSURANCE COMPANY
(for Registrant and as Depositor)
Attest: /s/ Christopher A. Martin By: /s/ William C. Thater
------------------------------ ---------------------------
Christopher A. Martin, William C. Thater,
Secretary President
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William C. Thater 4/30/99
- ----------------------------- President & Director
William C. Thater
/s/ Richard A. Leifels 4/30/99
- ----------------------------- Second Vice President
Richard A. Leifels and Controller
<F*> 4/30/99
- ----------------------------- Director
Willard N. Archie
<F*> 4/30/99
- ----------------------------- Director
Carson E. Beadle
<F*> 4/30/99
- ----------------------------- Director
James R. Elsesser
<F*> 4/30/99
- ----------------------------- Director
Stanley Goldstein
<F*> 4/30/99
- ----------------------------- Director
David D. Holbrook
II-5<PAGE>
<PAGE>
<S> <C> <C>
<F*> 4/30/99
- ----------------------------- Director
Richard A. Liddy
<F*> 4/30/99
- ----------------------------- Director
Leonard M. Rubenstein
<F*> 4/30/99
- ----------------------------- Director
H. Edwin Trusheim
<F*> 4/30/99
- ----------------------------- Director
Virginia V. Weldon, M.D.
<F*> 4/30/99
- ----------------------------- Director
Ted C. Wetterau
<F*> 4/30/99
- ----------------------------- Director
Ben H. Wolzenski
<F*> 4/30/99
- ----------------------------- Director
A. Greig Woodring
By: /s/ William C. Thater
-------------------------
William C. Thater 4/30/99
<FN>
<F*> Copies of powers of attorney authorizing William C. Thater to sign
the Registration Statement and amendments thereto on behalf of the
Directors of Security Equity Life Insurance Company are on file
with the Securities and Exchange Commission.
</TABLE>
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
9. Consent of KPMG LLP.
<PAGE>
EXHIBIT 9
CONSENT OF KPMG LLP
The Board of Directors
Security Equity Life Insurance Company
We consent to the use of our reports included herein and to the
reference to our firm under the heading "Experts" in the Registration
Statement and Prospectuses for Security Equity Life Insurance Company
Separate Account 13. Our report on Security Equity Life Insurance
Company's financial statements refers to a change in accounting for
the capitalization of acquisition costs in 1998.
KPMG LLP
St. Louis, Missouri
April 30, 1999
CAM:dw
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Security Equity Separate Account 13.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 53,712
<INVESTMENTS-AT-VALUE> 61,080
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61,080
<PAYABLE-FOR-SECURITIES> 4
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,076
<TOTAL-LIABILITIES> 61,080
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 37,922
<SHARES-COMMON-PRIOR> 1,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 61,080
<DIVIDEND-INCOME> 1,633
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 145
<NET-INVESTMENT-INCOME> 1,488
<REALIZED-GAINS-CURRENT> 1,367
<APPREC-INCREASE-CURRENT> 2,868
<NET-CHANGE-FROM-OPS> 5,868
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 32,020
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
